-^  V  s- 


UNIVERSITY  OF  CALIFORNIA 

AT   LOS  ANGELES 


Tof3cePasel38. 


Legal-Tender Ncteofthe  Ming  Dynasty,  1435. 

(OnRThirdthe  length  and  Breadth  of  the  Original) 


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RESUMPTION 

AND  THE 

Silver  Question 


Embracing  a  Sketch  of  the  Coinage  and  of  the 

Legal-Tender  Currencies  of  the  United 

States  and  other  Nations, 


A  HAND-BOOK  FOR   THE  TIMES. 

BY 

HENRY    V.    POOR. 


NEW  YORK : 

H.  V.  &  H.  w.  rooR, 

68    Broadway. 
1878. 


Copyright, 

'878, 

By  H.  V.  &  H.  \V.  POOR. 


New  York :  J.  J.  Little  &  Co.,  Printers, 
10  to  20  ABtor  Place. 


'  t  t    I  t  « 


T7D 


PREFACE. 


The  object  of  the  following  pages  is  to  present 
"^    in  a  concise  manner  the   irreconcilable  distinction 
between  currencies  of  banks  and  bankers — of  com- 
merce— which  are  instruments  arising  out  of  pro- 
duction  and  trade  ;  which  are  essential  to  their  oper- 
ations on  a  large  scale ;  which  are  limited  by  their 
extent ;  which  represent  a  corresponding  amount 
of  existing  capital,  and  arc  discharged  by  its  use, 
and  which  are  most  beneficent  in  their  rtsult :  and 
^  those  of   Government    notes,  which  do   not    arise 
J  out  of  production  and  trade ;  which  have  no  rela- 
st.  tion  to  the  extent  of  the  latter ;   which,  instead  of 
representing    a   corresponding  amount  of  existing 
capital,  represent  its  waste  ;   which  do  not  disap- 
pear by  their  use  ;  and  which,  having  the  force  of 
money  by  being  legal  tender,  are  necessarily  highly 
maleficent  in  their  result.      The  conclusions  of  the 
writer  have  been  supported  by  illustrations  drawn 

from^  the    most    memorable  examples    in    history. 

iii 


383108 


iv  PREFACE. 

His  object  is  to  appeal  to  the  intelligence  of  every 
citizen  in  the  land  ;  and  will  be  accomplished  if  he 
can  help  to  excite  a  wide  discussion  of  the  subject. 
He  is  confident  that  such  discussion,  conducted 
in  a  proper  spirit,  and  by  an  .adequate  method, 
must  lead  to  such  uniformity  of  conviction  of  the 
disastrous  effect  of  our  legal-tender  notes,  that  in 
place  of  any  increase,  the  public  will  demand  that 
steps  be  presently  taken  for  their  speedy  and  com- 
plete retirement. 


TABLE  OF  CONTENTS. 


PART  I. 

PAGE 

What  is  Paper  Money? i 

PART  II. 

Resumption  of  Specie  Payments  : — Conferences  between  the 
Secretary  of  the  Treasury  and  the  Committees  on  Finance 
of  the  Senate  and  of  Banking  and  Currency  of  the  House 
of  Representatives,  March,  1S7S 16 

PART  III. 

The  Silver  Question  :— A  Sketch  of  Cftinage  in  the    United 

States,  Great  Britain,  France  and  Germany iil 

PART  IV. 

Legal  Tender  Currencies: — Currency  of  the  Mongols;  of  the 
•American  Revolution;  of  the  French  Revolution  ;  of  the 
United  States  during  the  Rebellion,  and  of  the  "Confede- 
rate Stales" 138 

PART  V. 
The  Greenback  Party 217 

PART  VI. 
Method  of  Resumption 233 

Index 243 


RESUMPTION 

AND   THE 

SILVER   QUESTION. 


PART  I. 
WHAT  IS  PAPER  MONEY? 


IN  a  recent  work  *  I  undertook  to  treat  money 
as  a  subject  coming  within  the  range  of  the 
exact  sciences.  I  now  propose  to  apply  the  laws 
there  unfolded  to  the  various  financial  proposi- 
tions before  the  country  for  the  resumption  of 
specie  payments,  and  especially  to  that  of  Mr. 
Secretary  Sherman. 

Should  a  bank — the  American  Exchange,  for 
example — cease  upon  a  given  day  to  make  further 
issues  of  notes  and  credits,  its  whole  capital,  with 
such  of  its  deposits  as  had  been  loaned,  would, 
without  action  or  effort  on  its  part,  be  returned  to 
it  in  coin  (assuming  it  to  be  on  a  specie  basis) 
within,  say,  ninety  days,  provided  its  bills  were  to 
mature  within    such    period,   and    were   paid.     Its 

*"  Money  and  its  T.aws/'cmhracinp  a  History  of  Monetary  Tlieo- 
ries  and  a  History  of  the  Currencies  of  tlie  United  Stales,  hy  Henry 
V,  Poor.     New  York:  H.  V.  &  H.  W.  Poor,  08  Hroadway.      1877. 
T  I 


2      RESUMPTION  AND  THE  SILVER  QUESTION. 


accumulations  of  coin  would  from  day  to  day  be 
in  ratio  as  they  were  paid.  Equally  without  ac- 
tion or  effort  on  its  part  would  all  its  liabilities  be 
taken  in.  The  process,  which  would  simply  be 
one  of  liquidation,  would  convert  all,  or  nearly  all, 
of  its  assets  into  coin.  The  following  statement 
may  be  assumed  to  show  approximately  the  con- 
dition of  the  bank,  when  it  ceased  to  make  further 
issues : 


Assets. 

Bills  receivable $10,000,000 

Coin  Reserves 3,500,000 

Real  Estate 350,000 

Due  from  other  Banks  3,150,000 


Total $17,000,000 


Liabilities. 

Share  Capital $5,000,000 

Deposits 10,500,000 

Note  Circulation 500,000 

Balance  (surplus).  .  .  .    1,000,000 


Total $17,000,000 


The  following  statement  would  show  approxi- 
mately its  condition  after  its  bills  and  other  dues 
were  fully  paid : 

Assets.  Liabilities. 


Coin  in  hand $16,150,000 

Real  Estate. . •. 350,000 


Total $16,500,000 


Share  Capital $5,000,000 

Deposits 10,500,000 

Balance  (surplus) 1,000,000 


Total $16,500,000 


Should  its  deposits,  or  a  portion  of  them,  be 
drawn,  its  coin  would  be  correspondingly  reduced. 

The  capital  of  the  bank  in  the  outset  might  have 
consisted  wholly  of  coin,  or  of  the  notes  and  credits 
of   other   banks,  or   of  bills  receivable    given   for 


WHAT  IS  PAPER  MONEY?  3 

merchandise,  a  sufficient  amount  of  coin  in  addition 
being  held  to  serve  as  reserves.  If  its  capital  were 
paid  in  wholly  in  coin,  the  process  of  discount,  till 
this  was  paid  out,  would  consist  of  an  actual  ex- 
change of  coin — of  capital,  for  the  bills  of  its  cus- 
tomers. When  this  was  paid  out  (less  an  amount 
sufficient  to  serve  as  reserves),  loans  would  be  made 
by  an  issue  of  the  notes  and  credits  of  the  bank 
for  bills  given  in  the  purchase  of  merchandise  fit- 
ted, and  in  demand,  for  consumption.  The  greater 
part  of  loans  at  bank  are  made  in  this  manner,  the 
process  of  discount  being  ordinarily  a  mutual  ex- 
change of  obligations.  The  parties  in  whose  favor 
the  discounts  are  made  pay  out  the  notes  and 
credits  received,  for  labor  and  material  to  be  used  in 
the  prosecution  of  their  industries — in  the  produc- 
tion of  merchandise  similar  to  that  already  put 
upon  the  market — and  for  which  the  bills  discounted 
were  given.  Those  to  whom  the  notes  and  credits 
are  paid  use  them,  as  a  rule,  as  money,  for  the 
purpose  of  reaching  some  one  of  the  articles  of 
merchandise  held  by  the  makers  of  the  bills. 
They  are  received  by  the  consumers  of  such  mer- 
chandise equally  with  coin,  for  the  reason  that  they 
are  received  by  the  holders  in  its  sale  equally  with 
coin,  these  using  such  notes  and  credits  in  the  pay- 
ment of  their  bills ;  the  bank  in  such  payments 
making  no  distinction  between  its  notes  and  credits 
and  coin.  No  sooner,  therefore,  are  its  notes  and 
credits  issued  than  they  immediately  enter  upon   a 


4        RESUMPTIOiV  AjVD  THE  SILVER  QUESTION. 

circuit  which  is  to  bring  them  back  to  it,  automat- 
ically, and  in  full  volume.  The  time  ordinarily 
consumed  in  making  such  circuit — that  is,  for  the 
distribution  for  consumption  of  the  merchandise 
which  the  bills  represent,  averages,  say,  ninety 
days.  Such,  consequently,  is  the  proper  limit  as 
to  time  of  discountable  paper,  which  should  always 
mature  before  or  simultaneously  with  the  return 
of  the  notes  and  credits  issued  in  its  discount,  in 
order  that  the  one  may  be  discharged  by  the  other. 
If  the  notes  and  credits  return  previous  to  the 
maturity  of  the  bills,  the  former  have  to  be  taken 
in  by  the  bank  by  the  payment  of  a  corresponding 
amount  of  coin.  So  soon  as  the  notes  and  credits 
return  to  the  bank,  they  are /;^«f/z«  officio,  so  far  as 
relates  to  the  transactions  in  which  they  were  issued, 
and  only  appear  when  new  ones  are  entered  into. 

As  the  process  of  discount  is  a  mutual  ex- 
change of  obligations,  the  process  of  payment  is 
ordinarily  their  mutual  cancellation.  If  the  bills 
are  paid,  the  notes  and  credits  issued  in  their  dis- 
count will,  as  a  rule,  be  the  instruments  of  such 
payment.  So  far  as  the  latter  are  deposited  in 
banks,  these  making  no  distinction  between  their 
own  notes  and  those  issued  by  others,  they  are 
daily  presented  for  redemption  through  the  oper- 
ations of  clearing  houses,  the  process  being  too 
familiar  to  require  further  description.  Whatever, 
therefore,  is  issued,  so  soon  as  it  has  performed  its 
function,  returns  regularly  and  necessarily  to  the 


WHAT  IS  PAPER  MONEY? 


5 


issuer  in  one  of  the  ways  described.  When  not 
retired  by  direct  payment  into  the  bank,  or  by 
mutual  offset  at  the  clearing  house,  it  must,  for 
the  want  of  merchandise,  the  ordinary  subjects 
of  consumption,  be  discharged  in  the  universal 
equivalent — in  coin.  No  credit  is  ever  given  be- 
tween issuers  of  currency.  Their  issues  are  always 
assumed  to  be  the  equivalent  of  coin,  and* are  treat- 
ed as  such  equivalent.  The  slightest  evidence 
that  they  are  not,  as  far  as  their  constituent  is 
concerned,  is  the  signal  for  their  instant  presen- 
tation to  the  issuer  for  coin.  The  law,  therefore, 
which  compels  the  redemption  of  paper  money  of 
all  kinds,  so  soon  as  it  has  performed  its  office  and 
function,  is  an  inexorable  one.  The  best  that  an 
issuer  can  hope  for  is  that  his  issues  shall  serve  as 
money — that  is,  remain  for  ninety  days  in  the  chan- 
nels of  circulation.  He  has  constantly  to  fear  that 
they  will  not  so  remain,  but  will  be  immediately 
presented  for  payment.  In  such  case  he  is  com- 
pelled to  suspend,  as  no  issuer  of  currency  is  able, 
as  a  rule,  to  take  in  all  his  liabilities  upon  the  in- 
stant. Each  one,  therefore,  is  most  scrupulous  to 
maintain  his  credit,  and  is  always  eager  to  strength- 
en his  position  by  drawing  in  coin  all  the  balances 
that  may  be  found  in  his  favor. 

Such  is  a  brief  description  of  the  money  of  banks 
— of  commerce.  It  is,  through  the  bills  discounted 
by  its  issue,  the  symbol  of  capital,  of  merchandise, 


6       RESUMPTION  AND  THE  SILVER  QUESTION. 

and  is  discharged  by  its  use.  Such  merchandise 
may  be  in  the  hands  of  the  public,  or  in  the  vaults 
of  the  bank  in  the  form  of  coin.  So  far  as  curren- 
cy is  symbolic,  a  corresponding  amount  of  capital, 
in  the  form  of  coin,  is  discharged  from  the  work  of 
distribution,  reducing  in  like  ratio  the  cost  of  such 
merchandise  to  the  consumer,  and  increasing  at  the 
same  time  the  profits  of  the  producer ;  each  sharing 
alike  in  the  saving  effected.  The  very  object  of 
such  symbols  is  to  furnish  convenient  and  inex- 
pensive, in  the  place  of  inconvenient  and  expen- 
sive; instruments  of  distribution.  They  belong  to 
the  class  of  mechanical  contrivances,  which  by 
supplanting  old  and  cumbrous  processes  by  new 
and  simple  ones,  have  changed  the  whole  face  of 
modern  society.  The  effect  of  such  currencies 
is  to  reduce  prices  precisely  as  the  application 
of  steam  to  production  reduces  prices.  The  ten- 
dency of  all  commercial  countries  is  to  their  use 
by  the  sale,  on  credit,  of  merchandise  in  gross, 
the  bills  given  laying  the  foundation  therefor. 
The  means  of  distribution,  and  consequently,  the 
money  of  the  country,  would  be  ideally  perfect 
when  every  article  entering  into  consumption  was 
represented  by  a  symbol  by  which  it  could  be 
reached.  Such  a  result,  however,  cannot  be  real- 
ized from  the  tendency  always  existing,  and  which 
can  never  be  fully  restrained — to  issue  symbols 
without  a  constituent.  The  best  corrective  of  such 
an  abuse  is  to  forbid  the  discount  of  bills  having 


WHAT  IS  PAPER  MONEY?  7 

more  than  ninety  days  to  run,  and  to  provide  that 
no  symbols  shall  be  issued  of  denominations  less 
than  ten  dollars.  In  England,  where  their  use  is 
carried  to  a  greater  extent  than  in  any  other  coun- 
try,'no  notes  of  banks  are  issued  of  less  denomina- 
tions than  five  pounds,  or  twenty-five  dollars. 

It  will  be  seen  from  what  has  preceded  that  the 
capital  which  is  to  retire  a  banking  currency  is  .or- 
dinarily merchandise  in  the  hands  of  the  public. 
The  bank  holding  the  bills  given  for  it  is  entitled 
to  their  proceeds.  As  a  rule,  however,  such  pro- 
ceeds come  into  its  possession  only  when  it  goes 
into  liquidation.  By  the  time  its  notes  and  credits 
ordinarily  return  to  it,  the  merchandise  represented 
by  them  has  reappeared  in  new  forms,  represented 
by  new  bills,  which  are  discounted  in  manner  de- 
scribed ;  the  notes  and  credits  issued  serving  for  its 
distribution,  the  reserves  beiflg  held  as  security 
for  new  transactions  precisely  as  they  were  held 
for  the  old.  In  this  way  whatever  is  produced  is 
distributed,  coin  interposing  only  when  the  notes 
and  credits  do  not  represent  their  proper  constitu- 
ent. As  they  will,  whether  they  represent  it  or 
not,  return  regularly  and  automatically  to  the  is- 
suer, they  must,  so  far  as  they  lack  such  constitu- 
ent, be  paid  in  coin.  This  is  held  for  the  purpose 
of  supplying  the  lack  of  such  constituents,  the  or- 
dinary subjects  of  consumption.  It  is  never  intended 
to  part  with  it,  but  to  hold  it  as  reserves  against 
any  sudden  or  unforeseen  contingency.     A  proper 


•  8        RESUMPTION  AND  THE  SILVER  QUESTION. 

proportion  must  always  be  maintained  between  re- 
serves and  liabilities.  If  a  bank  with  coin  reserves 
equaling  $1,000,000  may  safely  have  notes  and 
credits  in  circulation  representing  merchandise  to 
the  amount  of  $4,000,000,  it  must  reduce  its  issues  to 
$2,000,000,  if  from  any  cause  its  reserves  are  re- 
duced permanently  to  $500,000.  It  is  no  part  of 
|he  office  of  a  bank  to  lend  coin,  but  to  supply  instru- 
ments of  distribution  in  its  place.  It  is  weakened 
just  in  ratio  as  it  parts  with  coin,  and  strong  just  in 
proportion  as  its  liabilities  are  provided  for  without 
its  use.  A  bank  having  liabilities  of  $10,000,000, 
with  reserves  in  coin  equaling  $5,000,000,  and  with 
no  other  means  of  discharging  its  liabilities,  would 
be  immediately  put  into  liquidation.  The  courts 
would  interpose  upon  the  mere  suggestion  of  its 
condition.  On  the  other  hand,  a  bank  with  equal 
liabilities,  with  only  $1,000,000  of  reserves,  but  with 
$10,000,000  in  good  bills,  would  be  entirely  solvent 
and  beyond  the  reach  of  legal  interposition.  All  it 
would  have  to  do  to  convert  all  its  assets  into  coin, 
would  be  to  call  in  its  bills  receivable,  the  amount 
of  the  latter  equaling  the  excess  of  indebtedness  to 
it  on  the  part  of  the  public. 

Such  are  the  nature,  object,  use,  and  mode  of 
retirement  of  bank  money.  It  is  simply  the  instru- 
ment by  which  capital  is  reached.  Metallic — intrin- 
sic— money,  gold  and  silver,  serves  three  great  uses. 
It  is  the  highest  form  of  capital,  and  consequently 


WHAT  IS  PAPER  MONEY?  g 

is  the  instrument  of  reaching  by  direct  exchange 
all  other  kinds  of  capital.  As  the  desire  for  its 
possession  is  uniform  from  age  to  age,  an  attribute 
possessed  in  an  equal  degree  by  no  other  kind  of 
property,  it  forms  the  reserves  of  society.  When 
not  wanted  for  exchange  or  reserves,  it  is  used  in 
the  arts,  such  use  constituting,  in  fact,  the  basis  of 
its  value.  A  bill  of  exchange  drawn  upon  London 
may  have  the  value  of  coin  to  a  person  owing  debts 
in  that  city,  for  the  reason  that  its  conversion  into 
money  there  will  pay  such  debts.  It  is  its  capacity 
for  such  conversion  that  gives  it  its  value.  The  is- 
sues of  banks  break  up  the  bills  drawn  in  the  sale  of 
merchandise  i7i  gross,  into  denominations  suited  to 
the  convenience  of  the  public.  To  those  in  want 
of  such  merchandise  such  issues  serve  all  the  pur- 
poses of  coin.  There  will,  however,  always  be  hold- 
ers of  them  who  may  wish  to  convert  them  into 
coin  for  export,  to  serve  as  reserves,  or  for  use  in 
the  arts.  To  such  wants  the  issuers  of  currency 
must  respond.  So  far  as  they  are  able  to  do  this, 
their  issues  will  have  the  value  of  coin  to  their 
holder,  as  they  will  enable  him  to  reach  the  con- 
stituent in  any  form  desired.  It  is  such  a  provision 
that  gives  to  the  notes  and  credits  of  banks  the 
value  of  coin.  If  not  available  for  the  purpose  of 
reaching  every  kind  of  merchandise,  they  instantly 
fall  to  a  discount  from  the  price  of  coin. 

Let  us  see  how  far  the  paper  money  of  govern- 
1* 


10     RESUMPTIOX  AND  THE  SILVER  QUESTION. 

ments  corresponds  to  the  money  of  banks — to  the 
money  of  commerce.  Should  the  United  States, 
an  issuer  of  notes  to  serve  as  currency,  cease  to 
make  any  issues  for  a  period  of  three  months,  there 
would  be  returned  to  it  within  such  period  such 
portion  of  its  notes  as  equaled  the  revenues  col- 
lected— say  $60,000,000,  or  a  little  more  than  one- 
sixth  of  the  notes  at  present  outstanding,  assuming 
all  the  revenues  to  be  collected  in  them.  By  such 
return,  the  indebtedness  of  the  public  in  the  form 
of  taxes  would  be  discharged  in  an  equal  degree. 
A  corresponding  amount  of  the  indebtedness  of 
government  would  be  taken  in,  but  not  an  addi- 
tional dollar  added  to  its  means.  Should  it  cease 
to  make  further  issues  for  a  period  of  one  and  a  half 
years,  its  notes  would  (assuming  the  revenues  to 
amount  to  §240,000,000  annually)  be  wholly  taken 
in.  In  such  event  it  would  not  be  in  the  posses- 
sion of  a  dollar  in  coin,  in  consequence  of.  its  ceas- 
ing to  be  an  issuer  of  currency. 

Such  different  results,  following  an  action  pre- 
cisely similar  in  the  two  cases,  mark  the  wide  dif- 
ference between  the  position  of  banks  and  the  cur- 
rency they  issue,  and  that  of  the  government  and 
the  currency  it  issues.  The  notes  of  the  former 
when  properly  issued  are  always  the  evidence  of  a 
capital  which  is  to  provide  the  means  for  their  re- 
tirement. Such  provision  is  the  necessary  condi- 
tion of  their  circulation.  They  are  payable  on  de- 
mand in  order  that  their  constituent  may  always 


WHAT  IS  PAPER   A/OXEV? 


II 


be  available  to  the  holder.  They  circulate  at  the 
par  of  coin  for  the  reason  that  their  constituent 
has  a  value  in  coin  equal  to  their  nominal  amount. 
For  every  note  and  credit  issued,  two  parties  at  least 
— the  maker  and  indorser  of  the  bill  discounted — 
undertake  to  save  the  issuer  harmless  on  account 
thereof.  Interest  is  always  charged  to  their  re- 
ceiver for  such  period  as  the  bills  discounted  have 
to  run,  for  the  reason  that  they  secure  to  him  a 
corresponding  amount  of  capital  of  the  value  of 
coin.  They  are  never  made  competent  to  dis- 
charge the  indebtedness  of  the  issuer.  Such  pro- 
vision would  be  fatal  to  their  circulation,  as  it 
would  be  considered  as  discharging  him  wholly 
from  the  obligation  of  payment.  Their  use  largely 
increases  the  amount  of  coin  in  a  country,  from 
the  powerful  influence  they  exert  in  enlarging  its 
production  and  trade ;  the  coin,  and  paper  repre- 
senting merchandise  of  equal  value,  circulating  side 
by  side  in  proportions  to  suit  the  public  conve- 
nience. The  notes  of  a  government,  on  the  other 
hand,  are  never  issued  as  the  evidence  of  capital 
and  as  the  instruments  of  its  distribution,  but  al- 
ways to  supply  the  lack  of  it  to  the  issuer.  It 
alone  undertakes  their  retirement.  They  are  never 
issued  in  the  discount  of  bills.  Interest  is  never 
charged  to  the  parties  to  whom  they  are  paid,  for 
the  reason  that  they  represent  no  immediately 
available  constituent.  The  means  for  their  retire- 
ment   arc  never  provided  previous  to  their  issue. 


12     KESUMPT/OX  AA'D   THE  SILVER  QUESTION. 

Government  is  never  the  lender,  but  always  the 
borrower  of  capital.  Its  notes  are  never  made  pay- 
able presently,  from  its  inability  to  pay  them  pres- 
ently. As  they  are  always  the  last  resort  of  ex- 
haustion and  incompetency,  they  are  always  made 
legal  tender  in  the  discharge  of  contracts  equally 
with  coin  as  a  necessary  condition  of  getting  them 
into  circulation.  Otherwise  no  one  would  receive 
them  as  money.  Such  provision  may  for  a  time 
give  them  a  high  value,  but  can  never  raise  them 
to  the  value  of  coin,  for  the  reason  that  they  can 
serve  only  one  function  of  coin — the  payment  of 
debts.  They  cannot  be  exported  as  money,  held  as 
reserves,  nor  can  they  be  used  in  the  arts.  They 
lose  a  considerable  portion  of  their  value  so  soon 
as  the  debts  existing  at  the  time  of  their  issue  are 
discharged,  as  no  one  will  contract  to  receiv£  them 
at  a  future  day  as  the  equivalent  of  coin.  Their 
value,  consequently,  comes  to  depend  upon  the  time 
that,  in  public  opinion,  is  to  elapse  before  they  are 
paid.  Having  the  same  legal  competency,  they  al- 
ways speedily  drive  the  more  valuable  currencies  out 
of  circulation,  as  two  currencies  of  unequal  value 
will  never  circulate  side  by  side.  But  such  com- 
petency has  force  only  so  long  as  confidence  is  felt 
that  the  notes  will  eventually  be  redeemed.  When 
it  is  seen  that  they  will  not,  it  will  have  no  force 
or  effect  whatever.  They  always  inflate  prices  for 
the  reason  that,  instead  of  being  the  symbols  of 
capital,  they  are  always  instruments  in  excess  of 


WHAT  IS  PAPER  MONEY? 


13 


the  means  of  consumption.  They  are  promises  to 
pay  without  provision  for  payment,  and  are  neces- 
sarily subject  to  excessive  fluctuations  in  price,  due 
to  the  uncertainty  as  to  the  time  of  their  payment, 
a  matter  wholly  within  the  discretion  of  the  issuer. 
As  a  banking  currency,  so  far  as  it  is  symbolic,  is 
wholly  beneficent  in  its  effects,  discharging  from  use 
a  corresponding  amount  of  capital  in  the  form  of 
coin,  and  reducing  in  equal  ratio  the  cost  of  distri- 
bution, a  currency  of  government  notes  is  wholly 
malcffcent  in  its  effects.  It  is,  in  whatever  light 
viewed,  a  pure  and  unmitigated  evil.  The  issues 
of  banks  are  made  the  basis  of  industries  which  re- 
produce merchandise  equal  in  amount  at  least  to 
that  consumed.  The  greater  the  amount,  conse- 
quently, of  bank-money  properly  issued,  the  greater 
both  production  and  consumption.  No  matter 
what  its  amount,  there  can  be  -no  inflation,  as  the 
symbol  never  exceeds,  and  always  disappears  with, 
the  constituent.  A  government  currency,  on  the 
other  hand,  is  always  in  inflation  to  its  full  extent. 
As  it  becomes,  being  legal  tender,  the  reserves  of  all 
other  issuers,  there  is  necessarily  a  vast  increase  of 
currency  in  addition  to  its  amount.  The  imme- 
diate and  necessary  effect  is  an  excess,  in  ratio 
to  the  inflation,  of  consumption  over  production. 
From  the  increased  demand,  vast  commercial  and 
industrial  enterprises  are  presently  set  on  foot,  for 
the  products  of  which  there  is  no  corresponding 
power  on  the  part  of  the  public  to  consume.     The 


14    RESUMPTION  AXD   THE  SILVER  QUESTION. 

injurious  effects  begin  to  show  themselves  long 
before  the  currency  has  reached  its  maximum.  The 
old  loses  a  portion  of  its  power,  while  the  increas- 
ing wants  of  the  public  can  no  longer  be  supplied 
by  new  issues.  Those  who  have  embarked  in  in- 
dustrial enterprises,  seduced  by  an  apparent  abun- 
dance of  capital,  are  without  demand  for  their 
products,  or  means  to  sustain  the  immense  outlay 
they  have  made,  or  to  which  they  are  subject.  As 
very  large  numbers,  from  being  thrown  out  of  em- 
ployment, are  compelled  to  live  upon  their  past 
accumulations,  the  money  of  the  country  gradually 
flows  to  the  commercial  centers,  and  into  the  hands 
of  the  wealthy  few ;  the  great  mass  of  consumers 
coming  in  time  to  be  almost  wholly  wanting  in 
means  of  support.  The  condition  of  the  United 
States  to-day  is  a  striking  illustration  of  the  effect 
of  the  use  of  a  currency  which  is  neither  capital  nor 
the  evidence  of  capital.  There  is  a  vast  abundance 
of  products  of  all  kinds,  but  no  demand  for  them, 
even  at  rates  far  below  cost.  All  are  sellers — none 
buyers.  Those  who  possess  money  do  not  dare,  in 
the  general  uncertainty,  to  attempt  to  put  it  to 
any  productive  use,  in  the  utter  stagnation  which 
prevails  in  all  the  departments  of  commerce  and 
trade. 

That  which  has  preceded  has  only  epitomized 
the  results  of  experience  common  to  the  whole  race 
from  the  moment  that  money  has  been  used  in  any 


WHA  T  IS  PAPER  MONE  Y  ? 


15 


form.  No  banking  or  government  currency  was 
ever  maintained  at  the  value  of  coin  unless  full 
provision  was  made,  or  supposed  to  be  made,  for 
its  conversion  into  coin  or  its  equivalent.  Money, 
like  merchandise,  .is  accepted  only  at  its  real  or 
supposed  value.  Otherwise  no  distinction  would 
be  made  between  a  half  and  the  whole.  Mankind  in 
their  transactions  with  each  other  deal  in  realities, 
not  in  fictions ;  in  substantial  things,  not  in  shadows. 
There  never  was  a  currency  of  government  notes 
of  the  character  of  those  of  the  United  States  that 
was  not,  from  its  very  nature,  at  a  discount  from 
the  par  of  coin.  I  am  well  aware  that  very  different 
accounts  of  money  are  laid  down  in  the  books.  In  . 
all  it  is  confidently  stated  that  the  most  worthless 
substances,  by  being  declared  by  government  to 
be  money,  may  be  maintained  at  the  par  of  coin, 
provided  their  nominal  amount  does  not  exceed 
that  of  the  coin  supplanted  by  them  ;  and  that 
such  worthless  substances,  after  they  are  declared 
money,  may,  by  reducing  their  amount,  be  raised 
to  any  possible  pitch  of  value.  All  such  state- 
ments are  the  dreams  of  theorists  or  of  schoolmen, 
and  arc  without  the  least  support  in  reason,  or  in 
the  experience  of  mankind. 


PART   II. 
RESUMPTION    OF    SPECIE     PAYMENTS. 


IT  is  now  proposed  to  raise  the  value  of  the  gov- 
ernment notes  of  the  United  States  to  the  par 
of  coin.  The  provision  necessary,  in  the  opinion  of 
Mr.  Sherman,  Secretary  of  the  Treasury,  was  fully 
set  forth  by  him  in  recent  conferences  with  the 
Committee  of  the  Senate  on  Finance,  and  the 
Committee  of  the  House  of  Representatives  on 
Banking  and  Currency.  The  conference  with  the 
Senate  Committee  was  held  on  the  19th  of  March, 
1878.  At  this  conference  several  interrogatories 
were  proposed  to  the  Secretary  by  members  of  the 
Committee  which,  and  their  answers,  were,  with 
some  abbreviations,  as  follows  :  * 

The  Chairman.  Ought  the  Resumption  Act  to  be  re- 
pealed, and  if  not,  why  not  ? 

Secretary  Sherman.  The  question  is  a  very  general 
and  is  rather  a  legislative  than  an  executive  question  ;  but  I 

*  The  Committee  on  Finance  of  the  Senate  consists  of  Mr.  Mor- 
rill of  Vermont,  Chairman  ;  Messrs.  Dawes  of  Massachusetts,  Ferry 
of  Michigan,  Jones  of  Nevada,  Allison  of  Iowa,  Bayard  of  Delaware, 
Kernan  of  New  York,  Wallace  of  Pennsylvania,  and  Voorhees  of 
Indiana. 

16 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


17 


have  no  objections  to  answering.  I  think  the  Resumption 
Act  ought  not  to  be  repealed,  *  *  *  and  now  I  am 
fully  convinced  that  we  are  able  to  do  what  we  have  so  often 
promised  to  do  and  ought  to  do. 

Chairman.  Do  you  think  resumption  is  practicable  under 
the  present  law  ? 

Secretary  Sherman.  The  best  evidence  that  we  are 
able  to  resume  on  the  ist  of  January  ne.\t  is  the  progress 
that  has  already  been  made.  When  the  Resumption  Act 
was  passed,  the  premium  on  gold  was  about  \o\  per  cent. 
Since  that  time  it  has  been  reduced  to  a  nominal  rate.  It  is 
now  a  little  over  i.  Since  that  time  we  have  accumulated 
in  preparation  for  resumption  a  large  sum  of  gold.  I  have 
taken  some  pains  to  get  the  figures,  which  I  will  give  you  : 

Gold  coin $117,151,455  62 

Gold  bullion 7,937, 300  1 1 

$125,088,755  73 

Less  amount  to  credit  of  dis- 
bursing officers  and  outstand- 
ing checks 6,189,626  60 

Gold-certificates  actually  out- 
standing        44,498,500  00 

Called  bonds  and  interest 6,818,677  29 

Interest  due  and  unpaid 4,909,705  21 

62,416,509  10 

Available  gold  coin  and  bullion 62,672,246  63 

Available  silver  coin,  fractional 5,972,895  42 

Available  silver  bullion 3, 1 30,718  31 

Total  available  gold  and  silver $7i.775,86o  36 

*  *  *  Now,  in  regard  to  another  point  pertinent 
to  your  question,  we  have,  in  the  process  of  preparation 
for  resumption,  reduced  the  volume  of  United  States  notes. 


l8     RESUMPTION  AND  THE  SILVER  QUESTION. 

The  precise  figures  are  familiar  to  you.  The  amount  was 
$382,000,000  at  the  time  of  the  passage  of  the  Resumption  Act, 
and  the  amount  now  is  $348,618,024.  Again,  the  amount  of 
outstanding  bank-notes  has  been  reduced.  On  December 
31,  1875,  tlis  amount  was  $346,479,756;  on  December  31, 
1877,  $321,672,505,  and  on  February  28,  1878,  tlie  amount  of 
bank-notes  outstanding  was  $321,989,991  ;  but  the  amount  of 
bank-notes  of  banks  in  existence,  not  in  process  of  liquidation, 
was  $299,240,475,  and  the  difference  between  these  two  sums 
being  the  notes  of  banks  in  process  of  liquidation,  although 
the  notes  are  in  circulation,  yet  an  equal  amount  of  green- 
backs are  in  the  Treasury  as  a  special  deposit  to  redeem 
them. 

The  decline  in  the  price  of  gold,  compared  with 
government  notes,  may  be  due  to  clauses  which  have 
no  relation  whatever  to  their  relative  value.  The 
impression  is  now  almost  universal  that  the  Nation  is 
on  the  eve  of  resumption  ;  that  time  only  is  wanting 
to  bring  about  the  perfect  coincidence  of  notes  and 
gold.  Did  this  conviction  rest  upon  any  well-assured 
foundation,  a  contract  to  pay  gold,  say  at  the  end 
of  one  year,  would,  deducting  the  present  premium, 
be  as  readily  entered  into  as  a  contract  to  pay  a 
corresponding  amount  of  greenbacks.  There  is, 
however,  no  person  of  ordinary  sense,  were  the 
two  kinds  of  money  offered  him — the  gold  at  an  in- 
terest of  three  per  cent,  and  the  greenbacks  at  six — 
who  would  not  elect  to  pay  the  higher  rate,  from  the 
excessive  losses  which  the  gold  loan  might  involve. 
This  fact  marks  the  wide  distinction  that  still 
exists  between  the  two.     At  one  time  greenbacks 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


'9 


circulated  at  only  a  very  small  discount.  At  an- 
other they  were  at  a  discount  of  65  per  cent.  At 
the  present  time  they  are  at  a  discount  of  only  i 
per  cent,  below  the  price  of  gold.  Their  relative 
value  at  the  present  time,  as  in  the  past,  is  simply 
a  matter  of  opinion,  of  sentiment,  which,  as  will  be 
shown  in  the  progress  of  the  discussion,  may  be  as 
wide  of  the  mark  as  it  has  been  at  any  previous  time. 
A  depreciation  of  the  notes,  and  perhaps  an  exces- 
sive one,  is  certain  to  take  place  when  the  future 
discloses  the  entire  inadequacy  of  the  proposed  pro- 
vision for  resumption.  The  present  price  of  green- 
backs does  not  depend  upon  the  proposed  provision 
for  their  payment,  but  upon  a  value  to  be  derived 
from  the  uses,  as  currency,  to  which  they  may  be 
applied. 

Chairman.  What  effect  has  the  silver  bill  had,  or  is  likely 
to  have  upon  resumption  ? 

Secretary  Sherman.  I  do  not  want  to  tread  on  delicate 
ground  in  answerinf^  that  question,  Mr.  Cliairnian.  I  shall 
have  to  confess  that  I  have  been  mistaken  myself.  Now,  as 
to  the  silver  bill,  I  have  watched  its  operation  very  closely. 
I  think  the  silver  bill  has  had  some  adverse  effects,  and  it  has 
had  some  favorable  effects,  on  the  question  of  resumption. 
Perhaps  the  best  way  for  me  to  proceed  would  be  to  state  the 
adverse  effects  first.  It  has  undoubtedly  stopped  refunding 
operations.  Since  the  agitation  of  the  silver  question,  I  have 
not  been  able  largely  to  sell  bonds,  although  I  have  made 
every  effort  to  do  so.  *  ♦  *  Now,  another  adverse  effect 
the  silver  bill  has  liad  is  to  stop  the  accumulation  of  coin. 
Since  the  1st  of  January  we  have  accumulated  no  coin,  ex- 
cept for  coin-certificates,  and  except  the  balance  of  revenue 


20     RESUMPTION  AND  THE  SILVER  QUESTION. 

over  expenditure.  The  revenues  in  coin  being  more  than 
enough  to  pay  the  interest  of  the  debt  and  coin  liabilities,  we 
accumulate  some  coin. 

Another  effect  that  the  silver  bill  has  had  is  to  cause  the 
return  of  our  bonds  from  Europe.  Although  the  movement 
of  our  bonds  in  this  direction  has  been  pretty  steady  for  more 
than  a  year,  yet  it  is  latterly  largely  increased  ;  how  much  I 
am  not  prepared  to  say. 

On  the  other  hand,  I  will  give  the  favorable  effects.  In  the 
first  place,  the  silver  bill  satisfied  a  strong  public  demand  for 
bi-metallic  money,  and  that  demand  is,  no  doubt,  largely 
sectional.  No  doubt  there  is  a  difference  of  opinion  between 
the  West  and  South  and  the  East  on  this  subject,  but  the  de- 
sire for  remonetization  of  silver  was  almost  universal.  In  a 
government  like  ours  it  is  always  good  to  obey  the  popular 
current,  and  that  has  been  done,  I  think,  by  the  passage  of 
the  silver  bill.  Resumption  can  be  maintained  more  easily 
upon  a  double  standard  than  upon  a  single  standard.  The 
bulky  character  of  silver  would  prevent  payments  in  it, 
while  gold,  being  more  portable,  would  be  more  freely  de- 
manded, and  I  think  resumption  can  be  maintained  with  a 
less  amount  of  silver  than  of  gold  alone. 

Senator  Bayard.  You  are  speaking  of  resumption  upon 
the  basis  of  silver,  or  of  silver  and  gold  ? 

Secretary  Sherman.  Yes,  sir  ;  I  think  it  can  be  main- 
tained better  upon  a  bi-metallic,  or  alternative  standard,  than 
upon  a  single  one,  and  with  less  accumulation  of  gold.  In 
this  way  remonetization  of  silver  would  rather  aid  resump- 
tion. The  bonds  that  have  been  returned  from  Europe  have 
been  readily  absorbed— remarkably  so.  The  recent  returns 
in  New  York  show  the  amount  of  bonds  absorbed  in  this 
country  is  at  least  a  million  and  a  quarter  a  day.  We  have 
sold  scarcely  any  from  the  Treasury  since  that  time.  This 
shows  the  confidence  of  the  people  in  our  securities,  and 
their  rapid  absorption  will  tend  to  check  the  European  scare. 


RESUMPTION  OF  SPECIE  PA  YMENTS.  2 1 

Senator  Voorhees.  That  shows,  Mr.  Secretary,  that  this 
cry  of  alarm  \\\  New  York  was  unfounded.  Then,  this  capi- 
tal seeks  our  bonds  when  this  bi-vietallic  basis  is  declared? 

Secretary  Sherman.  Yes;  many  circumstances  favor  this. 
The  demand  for  bonds  extends  to  the  West  and  to  the  banks. 

Senator  Jones.  Then,  in  its  effect  upon  the  return  ot  the 
vast  amount  of  bonds  you  refer  to,  would  there  not  be  an 
element  of  strength  added  in  favor  of  resumption  in  that  the 
interest  on  these  bonds  returned  would  not  be  a  constant 
drain  upon  the  country  ? 

Secretary  Sherman.  Undoubtedly. 

Senator  Jones.  Would  the  fact  that  they  come  back  ena- 
ble us  to  maintain  resumption  much  easier  ? 

Secretary  Sherman.  Undoubtedly.    *    *    * 

Senator  Bayard.  You  speak  of  resumption  upon  a  bi- 
metallic basis  being  easier.  Do  you  make  that  proposition 
irrespective  of  the  readjustment  of  the  relative  values  of  the 
two  metals  as  we  have  declared  them  ? 

Secretary  Sherman.  I  think  so.  Our  mere  right  to  pay 
in  silver  would  deter  a  great  many  people  from  presenting 
notes  for  redemption  who  would  readily  do  so  if  they  could 
get  the  lighter  and  more  portable  coin  in  exchange.  Besides, 
gold  coin  can  be  exported,  while  silver  coin  could  not  be 
exported,  because  its   market   value  is  less  than  its   coin 

value. 

Senator  Bayard.  I  understand  that  it  works  practically 
very  well.  So  long  as  the  silver  is  less  in  value  than  the 
paper  you  will  have  no  trouble  in  redeeming  your  paper. 
When  a  paper  dollar  is  worth  98  cents  nobody  is  going  to 
take  it  to  the  Treasury  and  get  92  cents  in  silver  ;  but  what 
are  you  to  do  as  your  silver  coin  is  minted  ?  By  the  ist 
of  July  next  or  the  ist  of  January  next  you  have  eighteen 
or  twenty  millions  of  silver  dollars  which  are  in  circulation 
and  payal)le  for  duties,  and  how  long  do  you  suppose  this 
short  supply  of  silver  and  your  control  of  it  by  your  coinage 


22     RESUMPTION'  AND  THE  SILVER  QUESTION. 

\\\\\    keep  it  equivalent  to   gold — 7uhe)t  one    is  ivorih    ten 
cents  less  than  the  other  ? 

Secrktary  Sherman.  Just  so  long  as  it  can  be  used  for 
anything  that  gold  is  used  for.  It  will  he  ivorth  in  this 
country  the  par  of  gold  until  it  becomes  so  abundant  and 
bulky  that  people  will  become  tired  of  carryi7ig  it  about ; 
but  in  our  country  that  can  be  avoided  by  depositing  it  for 
coin-ccrtifica  tes. 

The  Secretaiy  gives  three  injurious  effects  of  the 
silver  bill:  the  stoppage  of  the  funding  of  the  sixes 
into  four  per  cents;  the  check  in  the  accumulation 
of  coin  for  resumption  ;  the  return  of  bonds  from  Eu- 
rope. The  first  two  effects  resolve  themselves  into 
one,  as  both  the  refunding  of  the  old  bonds  and 
the  accumulation  of  coin  depend  wholly  upon  the 
sale  of  new  bonds.  With  the  progress  of  the  dis- 
cussion, however,  all  three  injurious  effects  are 
shown  to  be  highly  advantageous,  and  to  be  power- 
ful aids  to  the  act  and  maintenance  of  resumption ; 
for  no  sooner  had  the  bi-metallic  basis  been  de- 
clared, by  means  of  which  the  value  of  all  classes 
of  bonds  were,  if  the  silver  bill  means  anything, 
scaled  down  lO  per  cent.,  than  upon  the  strength 
of  it  there  was  a  rush  for  bonds  from  the  West, 
which  championed  and  carried  through  the  bi- 
metallic basis,  as  well  as  from  the  banks  which  so 
bitterly  opposed  it.  In  this  increased  demand 
both  friends  and  foes  of  the  silver  bill  vied  with 
each  other  on  common  ground.  The  position  of 
the  country  for  resumption  was  strengthened,  ac- 
cording to  the  Secretary,  in  ratio  to  the  amount 


RESUMPTION  OF.  SPECIE  PAYMENTS.  23 

of  bonds  returned,  from  the  reduced  amount  of  in- 
terest to  be  remitted  abroad. 

Having  converted  the  injurious  effects  so  much 
deprecated  before  the  passage  of  the  bill  into  real 
and  substantial  blessings,  the  Secretary  proceeds 
to  enlarge  upon  the  advantages  in  reference  to 
which  there  was  no  doubt  or  controversy.  The 
silver  bill  was  a  "  popular  measure,"  and,  to  repeat 
him,  "  in  a  government  like  ours  it  is  always  good 
to  obey  the  popular  current."  Whether  good  or 
not  to  obey  the  popular  current  depends  on  wheth- 
er its  direction  be  good  or  bad.  The  President 
thought  it  wholly  bad  ;  that  the  silver  bill  was  cal- 
culated to  inflict  a  great  injury  upon  the  prosperity 
of  the  country ;  that  it  was  a  fraud  upon  public 
creditors,  a  stain  upon  our  national  character;  and 
vetoed  it  in  spite  of  its  passage  by  more  than  two- 
thirds  of  both  branches  of  Congress.  Had  the 
President  possessed  convictions  at  all  proportioned 
to  the  importance  of  the  subject,  he  and  his  Secre- 
tary would  verj'  speedily  have  parted  company. 
One  or  the  other  is  wholly  wrong  in  a  matter  most 
deeply  involving  the  moral  and  material  welfare 
of  the  Nation.  The  Secretary's  maxim,  that  the 
popular  current  is  to  be  followed  whichever  way  it 
flows,  is  the  curse  of  all  popular  governments,  and 
threatens  to  destroy  our  own.  Had  Washington 
acted  upon  it,  our  government  would  not  have  sur- 
vived the  term  of  his  office.  Never  did  a  public  ser- 
vant more  heroically  breast  the  popular  current  than 


24     RESUMPTION  AND  THE  SILVER  QUESTION. 

when  he  ratified  the  Jay  Treaty  ;  declared  the  abso- 
lute neutrality  of  the  country  in  the  wars  growing 
out  of  the  French  Revolution;  and  put  down,  by 
main  force,  the  Whisky  Insurrection  in  Pennsylva- 
nia. In  all  these  matters  the  popular  current  moved 
against  him  with  a  force  of  which  we  have  but 
little  idea.  The  public  squares  of  the  seat  of  gov- 
ernment at  the  time  were  lurid  with  the  glare  of  the 
flames  kindled  to  consume  his  efifigy,  as  well  as 
copies  of  a  treaty,  negotiated,  it  was  claimed,  in  the 
interest  of  our  hereditary  enemy.  Almost  single- 
handed,  he  met  the  popular  current  with  a  calm- 
ness of  conviction  and  sense  of  duty  which  over- 
came all  resistance,  and  carried  to  triumphant  con- 
clusions measures  which  are  now  acknowledged  to 
be  eminently  wise,  and  upon  whose  success  the 
very  existence  of  the  Nation  may  be  said  to  have 
depended.  His  brightest  laurels  were  won  by  the 
establishment  of  measures  carried  against  the  most 
determined  opposition  of  a  vast  majority  of  the 
people.  Twice  was  he  unanimously  elected  to  the 
Presidency.  Opposition  to  the  popular  current  be- 
came the  real  foundation  of  his  unbounded  popu- 
larity, as  the  result  always  vindicated  the  sound- 
ness of  his  judgment  and  the  integrity  of  his  * 
purpose.  Would  that  modern  demagogues  could 
see  that  pandering  to  the  popular  current  is  the 
surest  way  of  incurring  popular  disdain  and  con- 
tempt! The  path  that  leads  to  the  Presidential 
mansion  is  white  with  the  bleached  bones  of  aspir- 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


25 


ants  whose  only  method  of  reaching  it  was  to  com- 
mit themselves  to  the  fickle  and  treacherous  cur- 
rent of   popular  favor. 

Resumption,  according  to  the  Secretary,  can  be 
had  upon  a  bi-metallic  basis  with  less  amount  of 
coin  than  on  a  gold  basis,  for  the  reason  that  the 
inconvenience  in  the  use  of  silver  as  money  will 
deter  many  people  frohi  demanding  it  ;  while  it 
could  not  be  exported  for  the  reason  that  its  legal- 
tender  value  would  be  greater  than  its  market  or 
exportable  value.  When  gold  is  demanded,  there- 
fore, all  he  has  to  do  is  to  crush  the  impertinent 
applicant  beneath  a  vast  mass  of  the  more  ponder- 
ous metal.    Let  us  take  an  illustration.  Mr.  B , 

a  New  York  banker,  a  "  bloated  bondholder,"  hav- 
ing occasion  to  remit  a  million  dollars  to  Europe, 
walks  into  the  Treasury  with  an  air  of  importance, 
such  as  the  possession  of  a  round  million  would 
naturally  give,  and  blandly  asks  the  cash  for  his 
notes.  The  Secretary,  with  equal  blandness,  replies, 
"  Yes,  sir,"  touches  his  bell,  when  instantly  appear 
some  fifteen  or  twenty  stalwart  porters.     "  Roll  out 

Mr.  B two  hundred  kegs  of  silver."    Mr.  B 

starts  back  with  an  air  of  mingled  astonishment  and 
indignation  :  "  But  I  want  the  gold  for  export. 
You  stated  in  your  conference  with  the  Senate 
Committee  that  silver  cannot  be  exported,  for  the 
reason  that  its  market  value  is  less  than  its  legal- 
tender  value;  while  gold,  whose  actual  and  nom- 
2 


26     RESUMPTION  AND  THE  SILVER  QUESTION. 

inal  value  is  the  same,  can  be.  If  you  pay  me 
in  silver,  as  I  must  make  the  remittance,  I  shall 
lose  a  hundred  thousand  dollars  by  the  operation." 
"Ah!"  replies  the  Secretary,  with  his  upturned 
eye   fixed    on    vacancy.    "  Yes,  sir,"  exclaims   Mr. 

B ,  "  and  I  won't  stand  it !  "     "  Stop,"  says  the 

Secretary,  addressing  the  porters  who  had  just  be- 
gun to  roll  out  the  kegs ;  and,  turning  to  the 
banker :  "  Mr.  B ,  you  do  not  seem  quite  pre- 
pared on  your  part.  When  I  begin  to  pay  you  I 
want  to  make  a  clean  job  of  it.  Before  I  begin 
you  must  have  in  line  about  twenty  drays — a  ton 
and  a  half  for  each  is  a  fair  load.  This  will  save 
trouble  all  round.    Good  morning,  sir  !  " 

So  much  for  the  advantages  in  aid  of  resumption 
of  the  bill  to  remonetize  silver,  due  to  the  gravity 
of  one  of  the  metals  to  be  used.  The  Secretary  pro- 
poses to  treat  a  demand  for  gold  as  Mark  Twain's 
sporting  character  of  Calaveras  County  did  the 
notorious  jumping  frog  of  his  rival — weight  him  so 
with  ponderous  metal  that,  when  the  jump  upon 
which  an  immense  stake  depended  was  to  be  made, 
he  could  not  move  a  peg.  "  But,"  asks  Senator 
Bayard,  "  how  are  you  going  to  equalize  the  value 
of  gold  and  silver  when  one  is  worth  ten  per  cent, 
more  than  the  other?"  "The  thing  is  done,"  says 
the  facile  Secretary,  in  effect,  "  so  far  as  this  coun- 
try is  concerned :  use  silver  for  anything  that  gold 
can  be  used  for,  and  the  two  metals  will  have  the 
same  value.     For  the  foreign  trade  we  care  noth- 


RESUMPTION  OF  SPECIE  PA  YMENTS.  2/ 

ing,  as  for  this  we  can,  when  gold  is  demanded,  pay- 
out silver.  This  will  do  till  silver  becomes  too 
abundant  and  heavy  to  be  lugged  round.  All  we 
then  have  to  do,  to  equalize  their  value  to  any  ex- 
tent, is  to  receive  the  silver  on  deposit,  issuing  cer- 
tificates therefor.  The  two  metals  will  then  have 
an  equal  value,  no  matter  their  amounts,  for  the 
reason  that  a  certificate  of  a  deposit  of  ten  thou- 
sand dollars  of  one  metal  will  not  weigh  a  whit 
more  than  a  certificate  of  deposit  of  ten  thousand 
dollars  of  the  other." 

The  Secretary,  at  the  time  Senator  in  Congress, 
drew,  in  1873,  the  bill  demonetizing  silver,  one  of 
the  alleged  reasons  for  the  measure  being,  that  in 
consequence  of  a  slight  difference  between  the 
coined  value  of  gold  and  silver,  the  latter  had  wholly 
ceased  to  be  used  except  as  subsidiary  currency ;  it 
having  been  exported  at  its  bullion  value,  which  was 
greater  than  its  legal  value,  compared  with  gold. 
As  it  is  now  coined  at  a  legal  value  10  per  cent, 
greater  than  its  bullion,  gold  as  a  necessary  conse- 
quence will  be  the  metal  exported,  two  currencies 
of  equal  legal  and  of  unequal  bullion  value  never 
circulating  side  by  side.  If  he  would  resume  and 
maintain  resumption,  it  must  be  upon  the  basis  of 
silver.  Of  this  metal  he  had,  all  told,  upon  the  28th 
of  February,  1878,  §9,103,613,  He  must  have,  by 
his  own  showing.S  1 20,000,000.  He  should,  therefore, 
not  only  lose  no  time  in  converting  his  gold  into  sil- 


28     RESUMPTION  AND  THE  SILVER  QUESTION. 

ver,  but  make  all  future  sales  of  bonds  payable  in  it. 
Resumption  upon  silver,  however,  would  involve  a 
delay  of  three  years,  in  order  that  the  Mint  might 
have  time  to  turn  out  its  necessary  amount  of 
coin. 

Such  are  the  aids  to  resumption  derived  from  the 
silver  bill. 

Senator  Voorhees.  How  much  surplus  did  you  say  you 
had  on  hand  ? 

Secretary   Sherman.  I  have  now  seventy-one  millions. 

Senator  Voorhees.  Then  you  say  that  you  would  be  will- 
ing to  undertake  resumption  under  the  existing  laws  by  the 
1st  of  next  January.  Now,  with  the  aid  of  the  silver  bill 
and  the  coinage,  what  amount  of  coin  would  you  expect  to 
have  on  hand,  with  which  to  undertake  resumption  at  that 
time  ? 

Secretary  Sherman.  I  would  accumulate  about  five  mil- 
lions per  month  of  both  metals  from  the  ist  of  April  to  the 
1st  of  January,  which  would  be  forty-five  millions;  and,  if 
the  market  is  favorable,  I  think  I  would  try  to  make  good  the 
loss  that  I  have  suffered  by  not  accumulating  in  January, 
February,  and  March  of  the  present  year.  I  think  I  could  in 
this  way  accumulate  fifty  or  sixty  millions. 

Senator  Voorhees.  That  would  give  you  one  hundred 
and  fifty  millions. 

Secretary  Sherman.  Not  so  much  ;  nor  do  I  think  it  is 
necessary  to  have  so  much. 

Senator  Jones.  And  does  that  look  to  eliminating  the 
legal-tender  function  on  the  ist  of  January  next  ? 

Secretary  Sherman.  No,  I  think  not,  sir;  I  am  in  favor 
of  maintaining  the  legal-tender  currency. 

Senator  Kernan.  You  thought  that  you  could  practi- 
cally redeem  all  that  would  be  presented  ? 


RESUMPTION  OF  SPECIE  PA  YMENTS.  29 

Secretary  Sherman.  I  have  no  doubt  of  my  power  to 
reissue,  up  to  three  hundred  miUions  of  legal  tenders. 

Senator  Jones.  I  have  an  idea  that  would  make  a  good 
deal  of  difference. 

Senator  Ferry.  Then,  on  the  question  of  resumption, 
your  view  is  that,  with  ninety  millions  on  hand,  and  the  ac- 
cumulation of  sixty  millions  more,  or  even  forty  millions — 
which  would  be  one  hundred  and  thirty  millions— you  would 
be  willing  to  commence  the  resumption  of  the  present  volume 
of  the  currency,  both  national  and  bank  ? 

Secretary  Sherman.  Oh  yes.  The  banks  must  look  out 
for  themselves. 

Senator  Bayard.  I  would  like  to  ask  you  if  th^  condi- 
tion of  the  country  will  sustain  this  resumption  with  this  very 
large  accumulation  of  gold  by  the  banks  in  New  York;  and 
if  they  will  not  have  a  tendency  to  continue  to  increase  their 
reserve,  as  they  find  the  Treasury  running  in  the  same  direc- 
tion ? 

Secretary  Sherman.  The  national  banks  will  take  care 
of  themselves. 

The  Secretary  has  now  $71,000,000  in  the  Treas- 
ury available  for  resumption.  He  proposes  to  ac-* 
cumulate  §5,000,000  a  month  more  from  the  sale 
of  bonds,  so  as  to  raise  the  amount  under  his  own 
control  to  $120,000,000  by  the  ist  of  January.  He 
also  holds  in  the  Treasury  some  $60,000,000  of 
coin,  represented  in  part  by  certificates  of  deposit, 
a  part  of  it  being  held  for  the  redemption  of  call 
bonds,  and  a  part  subject  to  the  order  of  disbursing 
agents.  A  portion  of  these  sums,  perhaps  ten  or 
twenty  million  dollars,  he  hopes  to  make  avail- 
able for  resumption.     So  far  as  such  deposits  could 


30     RESUMPTION  AND  THE  SILVER  QUESTION. 

be  made  available  would  his  means  be  increased. 
The  proposition  to  use  a  portion  of  them  is  the 
reason  for  the  various  amounts  stated  to  be  appli- 
cable to  resumption,  some  of  the  Senators  putting 
it  as  high  as  $140,000,000.  As  it  would  be  utterly 
unsafe  to  rely  upon  deposits  "in  the  Treasury  not 
belonging  to  the  government,  the  amount  to  be 
counted  upon  as  available  for  resumption  can  be 
only  that  belonging  to  it,  and  set  apart  especially 
for  this  purpose. 

It  is  plain  that  $120,000,600  will  not  pay  $340,- 
000,000,  the  amount  assumed  to  be  outstanding 
on  the  1st  day  of  January  next.  The  Secretary 
declares  that  it  will  not ;  but  that — to  anticipate 
his  argument — with  the  above  provision  the  notes 
will  not  be  presented  for  redemption  from  the 
confidence  felt  in  their  value.  This  assumption 
involves  the  whole  question  at  issue.  What  is 
money?  Gold  and  silver — capital  in  its  highest 
form — for  the  reason  that  every  one  seeks  to  obtain 
them  by  parting  with  whatever  he  has  to  sell.  We 
need  not  here  discuss  w^hether  the  universal  desire 
for  the  precious  metals  be  innate  or  conventional. 
It  is  certainly  stronger  than  that  felt  for  any  other 
kind  of  property.  Another  kind  of  money  is  the 
issues  of  banks,  the  value  of  which  is  not  intrinsic, 
but  representative.  Such  value  depends  in  a  very 
small  degree  upon  the  coin  the  banks  hold.  It 
rests  chiefly  upon  the  merchandise  represented  by 
their  bills.     It  has  to  those  in  want  of  such  mer- 


RESUMPTION  OF  SPECIE  PA  YMENTS.  31 

chandise  the  value  of  gold,  and  is  accepted  in  its 
place.  Another  kind  of  money  is  government  notes. 
These  possess  none  of  the  attributes  of  bank  money ; 
no  specific  sum  is  provided  for  their  redemption. 
For  want  of  such  provision,  they  are  necessarily  at 
a  discount  from  gold.  They  will  remain  at  such  dis- 
count until  the  same  provisions  are  made  in  their 
favor  as  are  necessary  to  sustain  bank  currencies 
at  the  par  of  gold.  They  may,  of  course,  have 
a  greater  value  than  that  of  the  present  provision 
for  their  payment,  from  the  expectation  that  full 
provision  will  at  some  time  be  made ;  precisely  as 
the  notes  of  a  bank  may  have  a  greater  value  than 
the  apparent  provision  in  their  favor,  in  coin  or 
merchandise,  from  a  right  to  proceed  against  the 
shareholders.  But  future  provision,  either  on  the 
part  of  government  or  of  banks,  is  not  equivalent 
to  a  corresponding  amount  of  capital  in  hand. 
The  notes  of  both  will  remain  at  a  discount  till 
such  full  provision  be  made.  Resumption  on  the 
part  of  the  government  can  be  nothing  less  than 
such  provision. 

Another  reason  why  the  notes  of  a  government 
issued  as  currency  will  always  be  at  a  discount 
from  gold,  is,  that  they  are  always  instruments  in 
excess  of  the  means  of  consumption.  Should  the 
amount  of  gold  in  a  country  upon  a  specie  basis  be 
sudflcnly  doubled,  prices  of  all  other  kinds  of  mer- 
chandise would  necessarily  rise,  'i'iie  result  would 
be  the  same  should  banks  suddenly  and  largely  in- 


32     RESUMPTION  AND  THE  SILVER  QUESTION. 

crease  their  issues  by  discount  of  bills  not  the  rep- 
resentatives of  merchandise.  The  law  is  simply  that 
of  supply  and  demand,  and  is  as  inexorable  as  that 
of  gravitation  itself.  The  Secretary,  therefore,  in 
his  attempt  at  resumption,  is  confronted  at  the 
very  outset  by  obstacles  which  are  as  much  beyond 
his  power,  as  it  is  beyond  his  power  to  render  an 
acute  equal  to  a  right  angle,  or  to  make  one  and 
one  equal  four.  The  question  is  not  one  of  confi- 
dence, but  of  quantity.  Bank-notes  circulate  from 
the  confidence  which  exists  that  they  represent 
the  capital  adequate  to  their  payment.  The  confi- 
dence necessary  to  their  circulation  disappears  the 
moment  it  is  seen  that  they  do  not  represent  such 
capital.  Where  it  exists,  it  is  simply  trust  in  the 
integrity  of  the  issuer.  But  no  confidence  will  ever 
exist  that  $50  will  pay  $100.  This,  however,  is  the 
kind  of  confidence  on  which  the  Secretary  bases  his 
great  scheme  of  resumption.  The  moment,  there- 
fore, that  he  attempts  to  resume  with  a  provision 
of  only  $120,000,000,  a  run  will  immediately  set  in 
upon  him,  which  will  draw  all  his  coin  so  soon  as 
it  can  be  counted  out  to  eager  and  impatient  note- 
holders. There  will  be  plenty  who  will  see,  or 
fear,  that  resumption  cannot  be  maintained ;  that 
in  view  of  failure,  the  Secretary  will,  as  he  threat- 
ens, resort,  in  self-defense,  to  his  legal-tender  notes. 
They  would  do  their  best  to  anticipate  such  action. 
They  could  lose  nothing,  but  might  gain  every- 
thing, by  the  change.     The  legal-tender  clause  of 


RESUMPTION  OF  SPECIE  PA  YMENTS.  33 

the  notes,  instead  of  being  an  aid  to  resumption, 
would  only  serve  to  precipitate  the  rush  for  coin, 
for  fear  that  nothing  would  be  left  to  their  hold- 
ers but  payment  in  kind.  Resumption,  therefore, 
with  the  legal-tender  clause  preserved,  is  an  impos- 
sibility. 

With  a  full  provision  of  coin  for  his  notes,  the 
Secretary  can  no  more  maintain  them  in  circula- 
tion than  with  the  partial  provision  which  he  pro- 
poses. Three  hundred  and  forty  million  dollars 
could  not  be  accumulated  without  great  disturbance  _ 
in  commercial  circles.  So  soon  as  he  began  to  pay, 
a  large  amount  of  his  coin  would  necessarily  return 
to  its  accustomed  channels.  Large  sums  would 
immediately  be  drawn  by  the  banks  to  serve  as 
reserves  for  issues  equaling  perhaps  five  times  their 
amount.  As  the  coin  could  be  put  to  so  much  better 
use  by  banks  than  by  the  government,  the  whole 
of  it,  upon  the  plainest  principles  of  economy, 
would  be  immediately  drawn.  In  the  latter  case  the 
ratio  of  currency  to  coin  would  be  as  one  to  one; 
in  the  former,  as  five  to  one.  If  it  be  asked  why 
would  not  the  notes  convertible  into  coin  be  held 
by  the  banks  as  the  basis  of  their  currency,  instead 
of  the  coin  itself,  the  reply  is  as  obvious  as  it  is 
conclusive ;  it  is  that  the  notes  of  the  government 
may  always  be  made  legal  tender  in  payment  of 
demands  against  itself,  and  arc  always  liable  to 
be  resorted  to  for  such  purpose  ;  consequently,  as  it 
2* 


34     RESUMPTION  AND  THE  SILVER  QUESTION. 

costs  no  more  to  carry  coin  than  the  notes,  the 
holders  of  these  would  always,  as  a  matter  of  proper 
caution,  draw  the  coin.  From  the  very  nature  of 
things  it  is  utterly  impossible  that  a  currency  of 
coin  should  circulate  alongside  of  a  currency  of 
legal-tender  notes,  no  matter  the  present  provision 
made  for  their  payment.  The  right,  both  on  the 
part  of  the  government  and  the  people,  to  avoid  by 
their  use  the  payment  of  coin,  would  always  throw 
such  a  distrust  over  their  value  as  to  reduce  it 
below  that  of  coin,  which  in  consequence  would 
necessarily  disappear  from  circulation. 

Government  is  undoubtedly  capable,  with  a  mod- 
erate amount  of  coin,  of  maintaining  a  convertible 
currency  in  circulation  equal  in  quantity  to  that  of 
its  revenues  accruing  within,  say,  ninety  days;  such 
revenues  bearing  the  same  relation  to  its  notes  that 
the  merchandise  represented  by  the  bills  of  a  bank 
bears  to  its  notes  and  credits.  The  larger  part 
of  such  currency  would  come  into  the  possession  of 
those  who  had  revenues  to  pay,  and  would  be  held 
for  such  purpose.  A  smaller  portion  of  it  would 
find  its  way  into  the  hands  of  those  who  might  wish 
to  convert  it  into  coin  to  be  held  as  reserves,  or 
for  export,  or  for  use  in  the  arts.  Should  it  provide 
a  sufficient  amount  of  coin  to  meet  the  calls  upon  it 
last  described,  the  whole  issue — that  is,  an  amount 
equaling  the  immediately  incoming  revenues  — 
would  be  maintained  at  par,  as  the  holders  could 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


35 


avail  themselves  of  the  constituent  in  whatever 
form  desired  ;  gold,  so  far  as  drawn,  being  the  uni- 
versal equivalent.  To  such  extent,  and  to  such 
extent  only,  can  a  government  maintain  a  converti- 
ble currency  in  circulation. 

Senator  Morrill.  How  can  the  policy  of  resumption  be 
aided  by  Congress  ? 

Secretary  SheriMan.  I  think  that  you  can  aid  resump- 
tion very  much  if  you  will  allow  me  to  receive  United  States 
notes  in  payment  of  bonds.     *     *     * 

Senator  Jones.  Let  me  see  if  I  understand  you.  Is  your 
idea  this  :  that  if  you  were  permitted  to  sell  four  per  cent, 
bonds  for  currency,  it  would  raise  the  value  of  currency  ? 

Secretary  Sherman.  It  would. 

Senator  Jones.  And  in  that  respect  would  aid  you  in  re- 
sumption— it  would  extinguish  to  a  certain  degree  the  pre- 
mium between  gold  and  currency  ? 

Secretary  Sherman.  Yes,  sir. 

Senator  Ferry.  You  would  substantially  recognize  cur- 
rency, then,  as  equal  to  coin  ? 

Secretary  Sherman.  I  think  it  makes  it  so. 

Senator  Voorhees.  Why  could  not  the  government  re- 
ceive its  customs  duties  in  currency  ? 

Secretary  Sherman.  I  will  answer  that  in  a  moment  if 
you  please.     *     *     * 

Senator  Ferry.  The  process  is  to  retire  tlie  higher  rate 
interest  bond,  and  put  out  the  lower  rate  bond  ? 

Secretary  Sherman.  Yes,  sir;  the  saving  in  tlie  difference 
of  interest  in  si.\  months  would  cover  the  extra  amount  paid 
as  difference  between  currency  and  coin.  I  think  another 
aid  to  resumption  is  very  desirable.  If  you  could  make  it 
clear  by  legislative  enactment  that  the  Secretary  has  the 
power  to  reissue  United  States  notes  after  the  ist  of  January, 


36     RESUMTTION  AND  THE  SILVER  QUESTION. 

to  the  amount  of  $300,000,000,  that  would  relieve  the  people, 
and  relieve  the  whole  country,  from  the  fear  which  they  have 
that  the  <jreenback  currency  is  to  be  entirely  destroyed.  If  we 
are  to  attempt,  on  the  ist  of  January,  to  pay  off  all  these 
greenbacks  as  presented  and  to  destroy  them,  I  have  my 
doubts  of  our  ability.  I  think  the  law  is  perfectly  clear  now 
as  to  the  power  to  reissue  up  to  three  hundred  millions  cur- 
rency. »  *  *  Another  thing  I  would  recommend,  and 
this  is  in  answer  to  Mr.  Voorhees.  I  wQuld,  on  the  ist  of 
October  next,  receive  United  States  notes  in  payment  for 
duties,  and  yet  provide  for  the  interest  on  bonds  in  coin — in 
other  words,  I  would  assume  on  the  ist  of  October  next  that 
our  notes  were  as  good  as  gold  and  silver,  and  would  receive 
them  as  such. 

Senator  Morrill.  Can  you  do  that  in  the  face  of  the 
solemn  pledge  on  the  statute-book. 

Secretary  Sherman.  Yes.  *  *  *  if  the  note  is  the 
practical  equivalent  of  coin  it  will  be  received  as  coin  for 
interest,  and  we  should  take  it  as  coin  for  duties.    *    *    * 

Senator  Bayard.  What  becomes  of  your  law  of  1862  ? 

Secretary  Sherman.  It  does  not  abrogate  it. 

Senator  Bayard.  I  think  that  declared  that  the  duties 
should  be  made  payable  in  coin,  and  they  were  specially 
pledged  to  this  end. 

Secretary  Sherman.  I  know;  but  we  pay  the  interest  in 
coin. 

Senator  Bayard.  I  know  you  pay  the  interest,  but  the 
underlying  idea,  to  a  certain  class,  has  been  to  pay  these 
duties  in  Treasury  notes.  If  these  were  not  redeemable,  to 
do  this  would  be  a  violation  of  that  solemn  pledge.     *     *     * 

Secretary  Sherman.  I  want  to  state  to  Mr.  Bayard 
that  we  are  receiving  customs  now  in  a  form  of  paper  money. 
Our  duties,  nearly  all  of  them,  are  paid  in  certificates  of 
money;  we  pay  out  these  certificates,  and  we  pay  but  coin. 

Senator  Bayard.  The  certificates  actually  represent  gold, 


RESUMPTION  OF  SPECIE  PA  YMENTS  37 

otherwise  there  would  be  a  breach  of  contract.  Instead  of 
taking-  gold,  we  take  certificates  of  deposit. 

Secretary  Sherman.  We  receive  greenbacks  iff  the  same 
way  as  gold  certificates,  payable  after  three  months  after  the 
1st  of  October  next. 

Senator  Bayard.  I  understand  that  is  so,  and  I  agree 
•with  you  that  whenever  a  greenback  is  equivalent  to  a  cer- 
tificate of  deposit  for  gold,  then  it  is  a  mere  convertibility  of 
terms. 

Secretary  Sherman.  That  is  precisely  what  I  would 
make  it. 

(The  Secretary  here  read  a  letter  from  Mr.  Gilfillan,  Treas- 
urer of  the  United  States,  in  which  he  stated  that  the  interest 
on  the  registered  5,  4*,  and  4  per  cents,  are  now  paid  in  coin 
checks;  and  that  the  principal  and  interest  on  the  called 
bonds  were  paid  by  coin  checks,  the  past  year  to  the  amount 
of  $127,124,450.) 


Senator  Ferry.  The  Secretary  stands  upon  the  presump- 
tion assured  by  these  facts,  that  on  the  ist  of  January  there 
is  no  question  that  he  can  on  the  volume  now  out  resume, 
and  as  respects  the  greenbacks,  it  is  simply  a  difference  of 
form  between  them  and  certificates  of  coin,  and,  therefore, 
he  says  he  would  be  ready  on  the  ist  of  October  to  receive 
the  greenbacks  in  payment  of  duties,  because  he  has  or  will 
have  coin  enough  to  meet  maturing  interest  and  resume. 

Secretary  Sherman.  I  never  would  receive  the  green- 
back for  customs  duties  until  I  knew  it  was  as  good  as  coin, 
and  I  would  l)c  willing  to  run  the  risk  of  anticipating  that  for 
three  months  if  that  would  help  the  matter. 

Having  shown  how  two  metals,  widely  differing 
in  value,  may  be  made  equal,  by  receiving  them 
indifferently  in  the  operations  of  the  government, 


;i83108 


38     RESUMPTION  AND  THE  SILVER  QUESTION. 

the  Secretary  craves  the  privilege  of  raising,  by  a 
similar  device,  the  notes  of  the  government  to  the 
par  of  gold.  To  recognize  them  as  equal  to  gold, 
he  tells  us,  "  makes  them  so."  Armed  with  such 
power,  he  would  anticipate  by  three  months  the 
appointed  time  of  resumption.  He  would  violate 
no  law  or  pledge  of  the  government  by  collecting 
and  paying  the  interest  accruing  on  the  bonds  in 
notes,  as  under  the  new  regime  there  would  be  no 
difference  between  notes  and  gold.  Already,  he 
says,  has  this  difference  between  paper  and  gold 
disappeared  in  some  of  the  most  important  opera- 
tions of  government.  The  greater  part  of  the  duties 
are  collected  and  the  interest  and  principal  of  the 
public  debt  are  now  paid,  not  in  coin,  but  in  paper, 
the  holders  preferring  it  to  coin.  "You  see,"  he  ex- 
claims triumphantly,  "  the  equality  of  paper  with 
coin  already  established :  why  not  allow  me  to  raise 
the  notes  as  well  as  the  coin-certificates  of  the  gov- 
ernment to  the  par  of  gold  by  using  each  equally 
in  payment  for  bonds  and  for  customs  ? "  Mr. 
Bayard,  rising  to  the  spirit  of  the  occasion,  exclaims, 
"  I  understand  that  is  so  !  And  I  agree  with  you 
that  whenever  a  greenback  is  equivalent  to  a  certifi- 
cate of  deposit  for  gold,  then  it  is  a  mere  converti- 
bility of  terms  !  "  Mr.  Ferry,  equally  pertinent  and 
profound,  and  who,  had  he  been  the  first  to  speak, 
might  have  been  equally  original,  followed :  "  As 
respects  the  greenbacks,  it  is  simply  a  difference 
of  form  between  them  and  certificates  of  coin ! " 


RESUMPTION  OF  SPECIE  PA  YMENTS.  35 

AH  seemed  equally  to  recognize  that  they  stood  at 
last  in  the  full  blaze  of  the  financial  millennium; 
that  the  hard  and  cruel  distinction  between  the 
value  of  gold,  wrought  out  of  the  earth  at  such  infi- 
nite cost  and  toil,  and  an  equal  nominal  amount  of 
paper,  the  cheapest  of  human  products,  was  forever 
done  away.  It  was  no  longer  a  conference  for  de- 
liberation, but  a  love-feast  to  celebrate  final  and  full 
fruition.  It  is  hard  to  disturb  the  childlike  confi- 
dence and  serenity  with  which  the  gravest  prob- 
lems were  so  quickly  disposed  of ;  but  if  the  Secre- 
tary would  make  certificates  of  deposit  and  the 
legal-tender  notes  of  the  government  like  in  result, 
is  it  not  necessary  for  him  to  make  them  like  in 
kind?  A  certificate  of  deposit  represents  a  corre- 
sponding amount  of  gold  especially  set  apart  for  its 
payment,  and  is  payable  on  demand.  It  is  purely 
commercial  paper.  The  legal-tender  note  does  not 
represent  a  corresponding  amount  of  gold  set  apart 
for  its  payment,  nor  is  it  payable  on  demand.  To 
make  it  payable  on  demand  ;  to  make  it  a  certificate 
of  deposit,  a  piece  of  commercial  paper,  involves  the 
provision  of  gold  equal  to  its  amount.  Is  it  safe  to 
assume  that  a  legal-tender  note  for  $1,000,  payable 
at  the  pleasure  of  the  government,  and  for  which 
provision  has  been  made  equaling  only  one-third 
its  nominal  amount,  will  have  a  market  value  equal 
to  that  of  a  certificate  for  a  like  amount,  payable 
on  demand,  and  for  which  full  provision  in  gold 
has  been  made  ?     If  not,  then  the  whole  resump- 


40     RESUMTTION  AND  THE  SILVER  QUESTION. 

tion  fabric  of  the  Secretary  falls  hopelessly  to  the 
ground. 

Senator  Kernan.  About  how  much  silver  should  there  be 
in  the  country  to  have  a  fair  supply  of  coin  to  pay  all  the 
duties  ? 

Secretary  Sherman.  That  is  a  doubtful  question.  If  the 
coin  is  convertible  into  coin-certificates,  I  think  $10,000,000 
or  $20,000,000  will  do  it. 

Senator  Kernan.  If  there  were  $20,000,000  in  coin-certifi- 
cates in  existence,  they  would  probably  pay  the  duties.'would 
they  not  ? 

Secretary  Sherman.  I  think  so. 

The  fact  that  $20,000,000  of  silver  on  deposit  will 
suffice  for  the  payment  of  all  the  customs  duties 
certainly  simplifies  the  situation,  by  showing  how 
small  is  the  amount  of  this  metal  required  for  so 
vast  a  service.  That  so  little  will  be  required  shows 
the  value  of  the  Secretary's  happy  contrivance,  by 
which,  by  means  of  certificates  of  deposit,  all  excess 
in  the  country  over  the  $20,000,000  required  for 
the  duties,  may  be  maintained  at  the  par  of  gold. 

Senator  Allison.  In  the  event  of  a  change  in  the  balance 
of  trade,  so  that  our  imports  shall  exceed  our  exports,  begin- 
ning, say  July  ist,  and  continuing  to  the  end  of  the  year,  what 
probable  effect  would  that  have  upon  your  ability  to  resume  ? 
or  have  you  any  machinery  by  which  you  can  counteract  any 
such  influence  that  might  happen  temporarily  during  this  in- 
terval ? 

Secretary  Sherman.  If  the  current  of  trade  should  be 
against  us,  it  is  pretty  difficult  to  answer.  If  we  had  power 
to  raise  the  rate  of  interest,  we  might  check  it.     I  do  not 


RESUMPTION  OF  SPECIE  PA  YMENTS.  41 

know  that  the  government  would  be  much  affected  by  the 
balance  of  trade,  and  I  think  we  could  go  on.  It  would  un- 
doubtedly be  harder  upon  the  people. 

The  Chairm.\n.  Suppose  there  should  or  should  not  be  a 
European  war  ;  would  either  have  any  effect.'' 

Secretary  Sherman.  All  such  circumstances  would 
have  an  effect  upon  merchants. 

The  Secretary  has  certainly  the  advantage  of 
merchants  in  case  of  an  adverse  state  of  the  foreign 
trade.  These  must  pay  in  gold,  in  the  currency  of 
the  nation  by  means  of  which  all  our  payments  to 
other  countries  are  made.  If  a  run  be  made  upon 
him,  all  he  has  to  do  is  to  intrench  himself  behind 
a  barricade  of  silver,  which  he  declares  to  be  not 
exportable  for  the  reason  that  its  domestic  legal- 
tender  value  is  greater  than  its  exportable  value  ; 
or  should  from  any  cause  the  silver  defense  be  car- 
ried, all  he  has  to  do  is  to  retire  within  the  inner 
and  more  formidable  citadel  of  greenbacks,  and 
from  such  fastness  hurl  defiance  at  his  pursuers. 
Such  arts,  so  proper  to  the  government  of  a  great 
nation,  do  not  become  merchants,  who  must  pay  in 
gold  or  break. 

The  Chairman.  Don't  you  believe  there  will  an  expansion 
come  upon  us  naturally  or  by  action  of  the  Treasury  Depart- 
ment on  the  1st  of  January?  Will  there  not  be  more  money 
in  actual  circulation  after  tlint  period  ? 

Secretary  Sherman.  I  think  and  hope  so. 

Senator  Ferry.  Would  not  that  produce  a  healthier  con- 
dition ? 

Secretary  Sherman.  Yes,  sir. 


42     RESUMPTION  AND  THE  SILVER  QUESTION. 

We  can  only  reply: 

"  Happy  is  your  grace 
That  can  translate  the  stubbornness  of  fortune 
Into  so  quiet  and  so  sweet  a  style." 

Senator  Kernan.  And  your  opinion  is  that  authority  to 
reissue  the  legal-tender  notes  should  be  expressly  given  by 
law. 

Secretary  Sherman.  I  think  that  authority  to  reissue, 
unquestioned  and  undoubted,  would  take  away  the  fears  of  all 
classes  of  people  :  First,  those  in  favor  of  inflation,  who  do 
not  want  the  greenback  destroyed  ;  then,  in  the  Eastern 
States,  where  they  think  we  ought  to  retire  the  greenbacks 
and  issue  bank-notes  instead,  and  believe  that  we  are  bound 
under  existing  law  to  pay  the  w'hole  of  the  $300,000,000. 
And  that  we  are  not  prepared  to  do. 

Senator  Allison.  In  other  words,  you.think  we  cannot 
come  to  and  maintain  specie  payments  without  the  power  to 
reissue  ? 

Secretary  Sherman.  I  do  not  think  we  can. 

The  conference  with  the  Senate  Committee  here 
ended. 

We  now  leave  the  august  presence  of  the  Senate 
for  the  freer  and  more  invigorating  air  of  the 
House.  No  sooner  had  the  Committee  on  Banking 
and  Currency,*  the  one  of  that  body  to  which  are 

*  This  committee  consists  of  Mr.  Buckner  of  Missouri,  Chairman; 
Messrs.  Ewing  of  Ohio,  Hardenberg  of  New  Jersey,  Yeates  of 
North  Carolina,  Hartzell  of  Illinois,  Bell  of  Georgia,  Hart  of 
New  York,  Eames  of  Rhode  Island,  Chittenden  of  New  York, 
Fort  of  Illinois,  and  Phillips  of  Kansas. 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


43 


especially  confided  the  monetary  interests  of  the 
nation,  heard  of  the  interview  with  the  Senate 
Committee,  than  they  earnestly  appealed  to  the 
Secretary  that  he  would  appear  before  them,  and 
unfold  afresh  this  wondrous,  gospel  of  salvation  by 
faith  in  the  material  as  well  as  in  the  spiritual  world. 
Promptly  responding  to  the  call,  he  appeared  before 
the  House  Committee  on  the  1st  of  April,  1878.  As 
one  session  did  not  suffice  for  all  the  matters  to  be 
considered,  a  second  was  held  on  the  following  4th 
of  April.  A  communication  had  been  previously 
addressed  by  the  chairman  of  the  committee  to 
the  Secretary,  covering  the  points  to  which  his 
attention  was  to  be  mainly  directed.  The  first  re- 
quest was  for  .a  statement  showing  the  amount  of 
coin  in  the  Treasury  on  the  28th  of  the  preceding 
March,  where  located,  and  what  deductions  were 
to  be  made  from  it  on  account  of  actually  existing 
demands  against  it.  The  Secretary  replied  that 
the  amount  equaled  $134,920,080,  of  which  $118,- 
351,709  was  in  gold  coin,  $7,937,300  in  gold  bullion, 
$5,675,494  in  subsidiary  silver  coin,  and  $2,955,577 
in  silver  bullion — the  amount  differing  only  slightly 
from  that  held  on  the  28th  of  the  preceding  Febru- 
ary. In  answer  to  the  inquiry  as  to  the  amount  of 
gold  and  silver  coin  and  bullion  in  the  Treasury, 
from  1865  to  1877,  the  Secretary  professed  his 
inability  to  reply,  but  stated  the  amount  available 
for  resumption,  on  the  first  day  of  February,  1877, 
to  equal  $11,936,771,  and  on  the  first  day  of  Feb- 


44     A' E SUMPTION  AND  THE  SILVER  QUESTION. 

ruary',  1878,  to  equal  $71,775,860,  as  already  shown 
in  his  interview  with  the  Senate  Committee  ;  the 
amount  accumulated  during  the  year  equaling 
$59,839,089.  In  answer  to  the  inquiry  as  to  the 
amount  of  bonds  sold  up  to  February  1st,  1878, 
and  not  paid  for,  the  Secretary  replied  that  no 
bonds  had  been  sold  that  were  not  paid  for  ;  that 
the  amount  of  bonds  sold  under  the  Resumption 
Act  had  been  as  follows : 

5  per  cent  Bonds  of  i88r $17,494,350 

4^"   "   "    "  1891 15,000,000 

4  "   "   "   "1907 25,000,000 

$57,494,350 

The  amount  of  bonds  issued  on  account  of  re- 
funding was  stated  as  follows: 

5  per  cent  Bonds  of  1881 $490,000,000 

4i  "      "        "       "    1891 185,000,000 

4    "      "         "       "    1907 55,000,000 

Total $730,000,000 

Adding  the  amount  of  bonds  sold  on  account  of 
resumption,  a  total  aggregate  would  be  $787,494,- 

350- 

In  answer  to  the  fourth  inquiry,  as  to   the  usual 

annual  amount  of  coin  and  liabilities  of  the  govern- 
ment, the  Secretary  replied  by  giving  the  amount 
paid  the  last  fiscal  year : 


RESUMPTION  OF  SPECIE  PA  YMENTS.  45 

Coin  interest $92,883,431 

Amount  applied  to  sinking  fund 447,500 

Amount  paid  diplomatic  service 755>286 

Amount  paid  foreign  naval  service 2,224,124 

Amount  of  customs  refunded -  •  5»247.8oi 

Amount  for  refunding  national  debt,  etc 901,927 

Total $102,460,069 

In  answer  to  the  fifth  inquiry,  as  to  the  amount 
of  fractional  currency  redeemed  and  carried  to  the 
account  of  the  sinking  fund,  the  Secretary  repHed 
that  the  amount  so  redeemed  and  carried  in  1876 
equaled  $7,062,142;  in  1877,  $14,043,458;  and  in 
the  present  fiscal  year,  $3,382,621— making  a  total 
of  $24,488,221. 

The  sixth  inquiry  related  to  the  balances  of  the 
sinking  fund,  the  answer  to  which  is  omitted  as  not 
pertinent  to  the  main  subject  of  the  present  in- 
quiry— the  means  provided  for  and  the  conditions 
necessary  to  resumption. 

After  the  preceding  questions  had  been  disposed 
of,  the  discussion  took  a  wider  range,  Mr.  Chitten- 
den, one  of  the  committee,  leading  the  way  by 
proposing  to  the  Secretary  the  following  inquiries : 

First.  With  silver  dollars  and  silver-certificates  full  lecjal 
tender  for  ail  debts,  includin^^  the  customs  and  the  public 
debt,  is  not  gold  practically  demonetized  ?  and  how  will  you 
renew  your  supjjlies  or  prevent  its  exclusive  use  as  merchan- 
dise in  foreign  commerce? 

Second.  Is  there  no  danger  that  the  national  banks,  in  tak- 
ing care  of  themselves,  will  hoard  greenbacks  enough  to  ex- 


46     RESUMPTION  AND  THE  SILVER  QUESTION. 

haust  your  gold  reserves  when  the  day  for  resumption 
comes  ? 

Third.  Is  it  not  probable  that,  before  you  have  coined 
100,000,000  of  the  new  silver  dollars,  with  greater  activity  in 
foreign  trade,  they  will  be  exported  at  their  bullion  value  to 
settle  trade  balances,  and  with  what  effect  upon  the  price  of 
silver  bullion  ? 

Fourth.  Does  not  your  success  in  resuming  coin  payments 
with  our  so-called  double  standard,  depend  absolutely  upon 
an  advance  in  the  price  of  silver  bullion  in  London  to  about 
59  pence  sterling  per  ounce  ? 

Secretary  Sherman.  I  believe  we  can  maintain  at  par 
in  gold  a  certain  amount  of  silver  dollars  ;  precisely  what 
amount  I  would  not  like  to  say,  because  that  is  a  question  of 
opinion.  But  I  have  the  idea  that  we  can  maintain  at  par 
in  gold  no  less  than  $50,000,000 ;  perhaps  more — say  from 
$50,000,000  to  $100,000,000  ;  but  whenever  those  silver  dol- 
lars become  so  abundant  and  so  burdensome  that  the  people 
would  not  have  them  and  would  not  take  them,  and  that  they 
would  not  circulate,  then  undoubtedly  they  would  gradually 
sink  to  the  value  of  the  bullion  in  them.  *  *  *  Upon  the 
second  point :  It  may  as  well  be  understood  that  the  national 
banks  cannot  tlirow  upon  the  government  the  burden  of  re- 
deeming their  notes.  The  attempt  would  be  suicide.  They 
are  bound  to  redeem  their  notes  on  demand  at  the  Treasury 
with  United  States  notes  or  coin,  and  to  maintain  in  their 
vaults  very  large  reserves  of  United  States  notes.'  Any  effort 
of  theirs  to  force  the  redemption  of  their  reserves  of  United 
States  notes  in  coin  would  at  once  cause  the  government  to 
withdraw  all  government  deposits  from  them,  to  present  all 
bank-notes  held  or  received  by  the  government  for  redemp- 
tion, and,  if  need  be,  to  exchange  United  States  notes  for 
bank-notes. 

Such  a  struggle  as  these  gentlemen  contemplate  would 


RESUMPTION  OF  SPECIE  PA  YMENTS.         47 

end  in  their  losing  their  power  to  issue  circulating-  notes  at 
all.  Their  talk  about  forming  a  line  to  break  the  govern- 
ment is  not  discreet,  and  is  not  dangerous.  I  am  more  con- 
cerned about  what  you  will  do  than  about  what  they  will  do. 
The  United  States  Government  already  holds  a  larger  cash 
reserve  for  the  redemption  of  its  notes  in  proportion  to  demand 
liabilities  than  any  bank  represented  by  these  gentlemen, 
and  it  has  power  to  increase  it.  *  *  *  With  a  coin  reserve 
of  $100,000,000  to  $150,000,000  the  redemption  of  $300,000,- 
000  of  United  States  notes  would  be  easy,  and  that  reserve 
could  not  be  diminished  to  any  considerable  extent  by  the 
banks,  or  any  combination  of  banks,  without  a  continuous 
draft  upon  the  banks  to  make  it  good.  We  can  rely  upon 
the  intelligent  self-interest  of  the  banks  to  prevent  such  a 
struggle.  Nothing  could  provoke  it  more  quickly  than 
threats  by  bank  officers,  and  if  such  a  struggle  comes,  the 
government,  with  its  reserve,  with  ample  revenue,  and  the 
power  to  sell  bonds,  can  easily  maintain  resumption,  without 
fear  of  a  line  of  bank  cashiers  anxious  to  break  the  Treasury 
or  to  force  high  rates  of  interest. 

On  the  last  point  :  The  power  to  reissue  is  plainly  given 
by  Section  3579,  Revised  Statutes,  and  is  not  cut  off  any  more 
by  the  notes  coming  into  the  Treasury  in  exchange  for  coin 
than  in  payment  of  a  tax.  Even  if  the  Supreme  Court  hold 
them  as  no  longer  a  full  legal  tender,  they  are  as  much  so  as  a 
bank-note.  If  the  choice  must  be  made  between  the  two.  the 
common  interest  would  decide  in  favor  of  the  United  States 
note.  I  believe  both  ought  to  circulate  and  both  be  at  par 
with  coin.  But  nothing  is  so  discouraging  in  the  progress  of 
resumi)tion  as  for  national  banks  to  shrink  from  their  siiare 
of  the  burden,  or  to  make  threats  such  as  are  stated  by  some 
of  these  gentlemen;  and  nothing  is  so  injurious  to  the  bank- 
ing system,  or  will  precipitate  its' overthrow  more  certainly, 
than  a  popular  conviction  that  the  banks  are  endeavoring  to 
embarrass  the  government  in  maintaining  resumption. 


48     J^E SUMPTION  AND  THE  SILVER  QUESTION. 

Mr.  Chittenden.  I  did  not  hear  anything  on  the  part  of 
those  gentlemen  with  whom  we  conversed  at  the  Sul)-Treas- 
ury  in  the  form  of  a  threat,  and  I  appeal  to  Mr.  Ewing  to 
confirm  my  impression.  There  was  nothing  of  that  kind  in- 
tended, I  am  sure.  These  gentlemen  simply  expressed  the 
opinion  that  in  an  attempt  to  resume  with  any  stock  of  gold 
that  you  were  likely  to  have,  the  gold  would  be  transferred  to 
the  banks  naturally. 

Mr.  Ewing.  That  was  it, 

Mr.  Chittenden.  There  was  nothing  like  a  threat  ? 

Mr.  Ewing.  No;  on  the  contrary,  there  was  a  great. de- 
sire manifested  on  the  part  of  the  bankers  to  make  resump- 
tion safe. 

Secretary  Sherman.  I  hav-e  written  propositions  from 
these  gentlemen,  and  from  Mr.  Coe  himself,  that  if  I  will 
give  them  4^^  per  cent,  bonds  instead  of  4  per  cents,  they  will 
guarantee  resumption.  *  *  *  Now,  in  regard  to  the  reserve 
that  is  necessary,  there  is  a  difference  of  opinion.  I  would  like 
to  have  so  strong  a  reserve  that  there  would  be  no  question  of 
our  ability  to  resume,  and  I  think  (as  I  stated  to  the  Commit- 
tee on  Finance  of  the  Senate)  that  if  I  can  have  a  reserve  of 
one  hundred  and  thirty  millions,  or,  in  other  words,  if  I  can 
increase  my  present  reserve  about  fifty  millions,  I  do  not  see 
how  it  is  possible  to  prevent  us  from  resuming.  If  it  were 
known  to-day  that  it  was  certain,  I  should  have  such  a  re- 
serve by  the  istof  January,  and  if  it  were  certain  that  Con- 
gress would  be  willing  to  stand  by  the  experiment  of  resump- 
tion, we  would  have  resumption  at  once. 

Mr.  Ewing.  Neither  of  which  can  be  made  certain. 

Secretary  Sherman.  Yes  ;  if  I  could  sell  the  bonds  and 
get  the  reserve,  the  thing  would  be  made  certain  in  24  hours. 

The  reply  to  Mr.  Chittenden's  first  question  that 
upon  the  issue  of  $50,000,000  of  legal-tender  silver 
dollars,  their  value  would  sink  to  that  of  the  bul- 


RESUMPTION  OF  SPECIE  PA  YMENTS.         49 

lion  they  contain,  conclusively  shows  that  resump- 
tion cannot  be  had  upon  the  basis  of  gold,  this 
metal  being  certain  to  be  speedily  driven  out  of  the 
country  by  the  cheaper  currency  of  silver.  The 
Secretary  will  not  have  to  wait  till  $50,000,000  be 
issued;  the  distinction  will  show  itself  broadly 
enough  with  $10,000,000.  The  notes  of  the  gov- 
ernment are  speedily  to  be  made  receivable  in  the 
revenues,  so  that  silver  will  not  be  required  for 
this  purpose.  It  will  derive,  therefore,  no  value 
from  any  accidental  necessity  for  its  use.  Its 
value  here  will  be  its  value  in  the  London  market ; 
its  exchangeable  value  compared  with  gold  will, 
unless  the  Secretary  possesses  creative  power,  be 
its  bullion  value.  The  Secretary  might  as  well  as- 
sume that  the  price  of  cotton  in  this  country  could, 
for  domestic  purposes,  be  maintained  at  20  cents  a 
pound,  although  its  value  in  the  Liverpool  market 
equaled  only  lo  cents  a  pound,  as  to  assume  that 
the  price  of  silver  when  made  full  legal  tender  for 
domestic  use,  could  be  make  greater  than  its  ex- 
portable value.  If  he  would  resume  upon  a  metal- 
lic basis  at  all,  the  first  step  for  him  to  take  would 
be,  as  already  remarked,  to  convert,  with  all  possible 
speed,  his  gold  into  silver ;  but  this  in  the  end 
would  accomplish  nothing,  as  his  greenbacks  would 
speedily  fall  to  a  discount  in  reference  to  silver,  as 
promises  to  pay  capital  at  a  future  day  can  never 
equal  capital  in  hand.  He  would  have  the  same 
difference  between  silver  and  his  notes  as  now  c.x- 


50     RESUMPTION  AND  THE  SILVER  QUESTION. 

ists  between  gold  and  his  notes.  The  impossible 
problem  of  making  a  part  equal  to  a  whole  would 
still  confront  him. 

The  Secretary  asserts  that  "  The  banks  cannot 
throw  upon  government  the  burden  of  redeeming 
their  notes  ;  the  attempt  would  be  suicide."  The 
banks,  so  far  as  combination  is  concerned,  will 
attempt  nothing  of  the  kind.  The  government 
notes  will  be  presented  for  payment  in  obedience 
to  a  far  higher  law  than  any  that  the  banks  can 
enact.  There  was  never  a  contract  made  by  our 
government  for  payment  that  was  not  presented 
for  payment  according  to  its  tenor.  Its  creditors 
will  no  more  release  it  from  its  obligations  than  will 
those  of  banks  from  their  obligations.  If  it  issues 
bonds,  it  must  contract  to  pay,  and  must  pay  them 
as  they  fall  due.  If  it  issues  notes  as  money,  it 
must  take  these  in  as  they  fall  due  (that  is,  when 
such  notes,  like  those  of  banks,  have  performed  their 
circuit  as  currency).  The  moment  it  undertakes  to 
resume,  its  notes  will  obey  the  laws  of  all  convertible 
currencies.  It  will,  like  all  issuers,  have  to  enact  its 
proper  role.  The  banks  becoming  possessed  of  its 
notes  will  'demand  payment.  Such  of  their  notes 
as  come  into  its  possession  will  be  demanded  for 
payment.  The  balance  resulting,  after  mutual  off- 
set, must  be  paid  in  coin.  If  the  Secretary  under- 
takes to  resume  on  a  provision  of  $120,000,000  of 
coin,  and  if  he  pays  gold,  he  will  find  that  there 


RESUMPTION  OF  SPECIE  PAYMENTS.  51 

will  be  far  greater  haste  than  method  in  the  pres- 
entation of  his  notes.  The  results  will  be  precisely 
the  same  as  if  a  bank  of  issue  should  attempt  to 
resume  with  available  assets  equaling  only  one- 
third  its  liabilities.  The  presentation  of  his  notes 
will  simply  be  a  struggle  for  precedence.  It  will 
not  make  the  least  difference,  so  far  as  the  govern- 
ment is  concerned,  whether  the  banks  are  active  or 
entirely  passive.  They  owe  their  depositors  over 
$600,000,000,  all  of  which,  upon  resumption,  is  pay- 
able in  coin.  The  largest  of  these  depositors  are  mer- 
chants and  bankers  engaged  in  foreign  trade,  whose 
transactions  must  all  be  made  upon  the  basis  of  gold. 
They  are  not  going  to  wait  the  effect  of  an  adverse 
turn  of  the  exchanges  before  taking  any  steps  to 
meet  it.  They  will  not  delay  an  instant  in  putting 
all  their  cash  assets,  whether  of  government  or  of 
bank  issues,  into  gold — into  that  which  can  be 
used  in  their  operations  at  the  same  value  in 
every  country  in  the  world.  Their  deposits  exceed 
the  whole  provision  to  be  made  by  the  Secretary 
for  resumption.  They  will  take  timely  warning  from 
his  statement  before  the  Senate  Committee  that 
government  could  not  be  injured  by  an  adverse 
state  of  the  foreign  trade,  the  reason  being  that  if 
gold  was  demanded  in  great  quantities,  it  could 
pay  silver ;  and  if  silver  was  demanded  in  great 
quantities,  it  would  pay  nothing. 

Even  should  the  Supreme  Court  decide  the  gov- 


52     KESUMPTION  AND  l^HE  SILVER  QUESTION. 

ernment  notes  to  be  no  longer  full  legal  tender, 
they  would,  the  Secretary  tells  us,  "  be  as  much  so 
as  bank-notes.  If  the  choice  must  be  made  be- 
tween the  two,  common  interests  would  decide  in 
favor  of  the  United  States  notes."  Let  us  see : 
When  upon  a  specie  basis,  every  borrower  at  bank 
contracts  to  pay  his  note  at  its  full  face  in  coin. 
He  does  so  for  the  reason  that  the  notes  he  re- 
ceives secure  to  him  an  equal  value  with  coin.  In 
other  words,  the  means  for  the  retirement  of  such 
notes  are  provided  previous  to  their  issue.  How 
with  those  of  the  government?  The  provision  for 
their  immediate  conversion  into  coin  equals  only 
one-third  their  nominal  amount.  Ordinarily  the 
notes  of  banks  are  at  the  par  of  coin.  They  sus- 
pended in  1837,  and  remained  in  suspension  for 
about  a  year.  In  1858  they  again  suspended  for  a 
few  weeks ;  the  notes  of  those  of  the  cities  of  New 
York  and  Boston  never  being  at  a  discount  of  more 
than  one-half  of  i  per  cent.  If  they  were  not  or- 
dinarily payable  in  coin,  no  one  would  receive 
them,  for  every  one  contracting  to  receive  them 
obligates  himself  to  pay  a  corresponding  amount  of 
coin.  The  public  may  be  well  trusted  in  the  mat- 
ter of  securing  a  corresponding  equivalent  for  their 
engagements.  The  normal  condition  of  all  bank- 
ing currencies  is  an  equality  with  coin.  What  gov- 
ernment notes  would  be  without  the  legal-tender 
clause  was  well  set  out  by  the  Secretary  in  a  speech 
delivered  in  the  Senate  of  the  United  States,  on 


RESUMPTIOy  OF  SPECIE  PA  YMENTS.  53 

the  13th  of  February,  1862,  in  support  of  the  first 
legal-tender  bill. 

"  If  you  strike  out  this  tender  clause,  you  do  it  with  the 
knowledge  that  these  notes  will  fall  dead  upon  the  money 
market  of  the  world  ;  that  they  will  be  refused,  as  they  are 
now  refused  by  the  banks  ;  that  they  will  be  a  subordinate, 
disgraced  currency  that  will  not  pass  from  hand  to  hand  ; 
that  they  will  have  no  legal  sanction ;  that  any  man,  whether 
a  Jew  broker  or  any  other  of  the  numerous  kinds  of  brokers 
described  by  the  Senator  from  Massachusetts,  may  decline  to 
receive  them,  and  thus  discredit  the  operations  of  the  govern- 
ment. I  ask  again,  if  that  is  just  to  the  men  to  whom  you 
have  contracted  to  pay  debts  ?  When  you  issue  your  demand 
notes,  and  announce  your  purpose  not  to  pay  any  more  gold 
and  silver  coin,  you  then  tender  to  those  who  have  furnished 
you  provisions  and  services  this  paper  money.  What  could 
they  do  ?  They  cannot  pay  their  debts  with  it  ;  they  cannot 
support  their  families  with  it  without  a  depreciation.  The 
whole,  then,  depends  upon  the  promise  of  the  government  to 
pay  at  some  time  not  fixed  on  the  face  of  the  note.  It  is, 
then,  an  era  of  irredeemable,  depreciated  paper  money."  * 

Such  is  government  money  without  the  legal- 
tender  clause.  The  Secretary  was  speaking  from 
facts  staring  him  in  the  face.  In  1861,  upon  the 
issue  of  bonds  to  carry  on  the  War  of  the  Rebellion, 
permission  was  given  to  the  Secretary  of  the 
Treasury  to  issue  what  were  called  demand  notes 
(not  legal  tender)  to  the  amount  of  $50,000,000,  the 
Secretary  undertaking  to   maintain  them  at  par  by 

*  Congressional  Globe,  Part  1st,  2d  Session,  37lh  Congress,  p.  ySg. 


54     RESUMPTION  AND  THE  SILVER  QUESTION. 

redeeming  such  as  were  presented  in  coin.  When 
the  banks  were  broken  he  could  no  longer  redeem. 
His  notes  fell  to  a  discount  considerably  below  that 
of  bank-notes,  although  they  were  receivable  in  the 
payment  of  customs  duties  equally  with  coin,  while 
bank-notes  were  not  so  received.  To  raise  the  value 
of  the  government  notes,  the  amount  outstanding 
at  the  time  being  $33,400,000,  they  were  made  by  a 
special  act  legal  tender  in  all  contracts.  In  this 
way  the  value  was  brought  up  to  that  of  bank- 
notes, for  which  they  were  to  serve  as  reserves. 

Why  should  the  banks  combine  to  break  the 
government  ?  Are  they  not  the  holders  of  $400,- 
000,000  of  its  bonds,  and  $100,000,000  of  its  legal- 
tender  notes?  Is  there  any  way  in  which  their 
interests  could  be  so  advanced  as  by  an  increase 
in  the  value  of  such  an  enormous  mass  of  securi- 
ties? Is  there  any  class  in  the  community  that 
have  given  such  guarantees  for  an  earnest  and 
efficient  support  of  the  government  ?  -Is  there  a 
class  in  the  community  so  much  interested  in 
resumption  as  the  necessary  condition  of  maintain- 
ing the  value  of  their  assets?  In  the  struggle  with 
the  banks,  which  the  Secretary  sees  to  be  impend- 
ing, his  importance  will  be  that  of  the  fly  on  the 
coach-wheel.  All  his  notes,  on  an  average,  come 
into  the  possession  of  the  banks  within  periods  of 
ninety  days.  Within  such  time,  if  he  were  on 
a  specie  basis,  all  would   be   presented    for   coin. 


RESUMPTION  OF  SPECIE  PA  YMENTS.  55 

Within  such  time  he  might  perhaps  come  into 
possession  of-,  say,  $30,000,000  of  the  notes  of  the 
banks.  In  case  of  a  run  upon  each  other,  the 
banks  could  present  ten  dollars  to  his  one.  As  to 
reserves,  he  has  nothing  else,  while  the  banks  can 
take  in  every  dollar  of  their  liabilities  without 
touching  their  reserves.  He  cannot  get  in  a  dollar 
without  reducing  his  in  equal  ratio. 

The  Secretary  proposes  to  resume  on  the  amount 
of  notes,  $347,848,712,  outstanding  April  1st,  1878, 
less  the  amount  retired  by  the  operations  of  the 
Resumption  Law.  This  provided  for  the  can- 
cellation of  notes  equaling  80  per  cent,  of  the 
amount  of  new  banking  currency  issued.  The 
amount  of  notes  so  retired  equaled,  in  1875, 
$10,231,124;  in  1876,  $5,773,792;  in  1877,  $16,1  II,- 
308;  and  for  five  months  of  1878,  $3,100,466.  At 
the  rate  of  reduction  so  far,  for  1878,  the  amount 
of  notes  outstanding  October  1st  will  be  $344,248,- 
712  ;  and  on  January  1st,  1879,  $342,388,712.  The 
latter  is  the  probable  amount  on  which  resump- 
tion is  to  take  place,  and  the  amount  upon  which 
the  Secretary  would  undertake  to  resume  in  twenty- 
four  hours,  provided  he  could  sell,  for  gold,  $50,000,- 
000  of  bonds.  This  sale  has  been  made,  so  that  he 
is,  on  his  part,  fully  prepared  to  resume  on  the 
amount  of  the  outstanding  notes.  Hence  the  bill, 
subsequently  introduced,  with  his  approbation,  for 
receiving  the  notes  in  payment  of  the  customs 
duties. 


56     RESUMPTION  AND  THE  SILVER  QUESTION. 

Mr.  Eames.  I  desire  to  present  to  the  committee,  in  the 
presence  of  the  Secretary  of  the  Treasury,  a  consideration 
which,  I  think,  is  important  in  determining  the  question 
whether  the  government  can  resume  or  not  in  January,  1879. 
There  is'  now  outstanding  about  three  hundred  and  forty- 
seven  millions  of  greenbacks  and  three  hundred  and  sixteen 
millions  of  national-bank  notes,  amounting  together  to  some 
six  hundred  and  sixty  millions  of  paper  currency.  That  is 
now  used  for  the  purpose  of  the  business  transactions  of  the 
country.  The  point  to  which  I  wish  to  direct  the  attention 
of  the  committee  and  of  the  Secretary  of  the  Treasury  is, 
whether  the  three  hundred  millions  of  legal  tenders  are  not 
absolutely  requisite  for  the  business  purposes  of  the  country, 
and  whether,  therefore,  there  will  be  any  very  great  desire 
to  exchange  them  for  gold. 

Secretary  Sherman.  I  do  not  think  we  have  a  great  excess 
of  currency  now.  These  bankers  say  that  there  is  not  enough 
of  currency.  So  long  as  there  is  a  want  of  confidence  in  our 
ability  to  resume,  it  is  likely  that  the  greenbacks  will  be  pre- 
sented for  redemption  to  some  extent  ;  but  if  we  were  so 
strong  that  the  public  mind  was  satisfied  of  our  ability  to  re- 
sume, there  would  be  no  motive  to  present  notes  for  redemp- 
tion (especially  when  they  may  be  redeemed  in  silver).  Then, 
I  agree  that  these  notes  will  not  be  presented.  •*  *  *  I 
am  inclined  to  think  that  we  can  maintain  the  present  volume 
of  circulation — six  hundred  millions — but  that  is  a  larger 
paper  circulation  than  was  ever  maintained  by  any  other 
country.  That  is  a  question  for  the  banks  to  decide  for  them- 
selves.    *     *     * 

Why  did  not  Mr.  Eames  ask,  and  the  Secretary 
state,  the  amount  of  bills  of  exchange  required  for 
use  in  the  commerce  of  the  country,  assuming  a  fixed 
and  definite  amount  to  be  necessary?  The  proper 
answer  would  have  been,  an  amount  necessary  to 


RESUMPTION  OF  SPECIE  PA  YMEXTS.  57 

represent  the  merchandise  passing  to  and  from 
other  countries.  One  should  equal  the  other. 
Where  there  was  no  constituent,  there  should  be 
no  bills.  So  with  a  domestic  currency.  It  should 
equal,  or  rather  should  never  exceed,  the  merchan- 
dise fitted  for  consumption.  The  proper  rule  for  its 
issue  being  established,  the  amount  will  take  care 
of  itself.  The  danger  is  that  there  will  always  be 
too  much,  instead  of  too  little,  currency  in  a  coun- 
try. Every  dollar  of  government  notes  is  too 
much,  as  it  has  no  constituent  but  debt ;  and  debt 
without  interest  can  never  be  raised  to  the  par  of 
coin. 

Mr.  Ewin'G.  You  certainly  cannot  assume  that,  because 
you  have  had  that  accumulation  of  coin  in  the  Treasury  here- 
tofore when  there  was  no  redemption  of  legal-tender  notes, 
you  will  continue  to  have  it  after  redemption  begins  ? 

Secretary  Sherman.  I  think  we  can  assume  if,  when  gold 
was  not  in  circulation,  there  was  a  gold  balance  in  the  Treas- 
ury subject  to  demand  without  much  variation,  that,  when  all 
transactions  are  based  on  coin  or  paper  redeemable  in  coin, 
this  coin  will  remain  in  the  Treasury.  I  believe  that  one  of 
the  first  effects  of  resumption  will  be  to  increase  the  deposit 
of  coin  in  the  Treasury,  because  paper  will  be  so  much  more 
convenient  in  all  the  transactions  of  life  that  paper  will  be 
used  and  the  coin  will  be  deposited  with  us.  The  Sub-treas- 
ury in  New  York  will  be,  like  the  Bank  of  England,  the  i)hice 
of  deposit  for  all  the  coin  of  the  country;  and  coin-certifi- 
cates or  greenbacks  will  be  used  for  all  current  transactions, 
leaving  the  coin  only  to  be  drawn  to  meet  the  demands  ot 
foreign  trade  or  the  mutations  and  changes  of  supply  and  de- 
mand. 

3* 


58     RESUMPTION  AND  THE  SILVER  QUESTION. 

• 

The  Chairman.  That  would  depend  entirely  upon  the 
balance  of  trade  ? 

Secretary  Sherman.  Very  much. 

The  Chairman.  That  would  be  the  key  to  the  situation? 

Secretary  Sherman.  Yes,  sir. 

Mr.  Phillips.  You  state  that  we  have  coin  interest  to  pay 
to  the  amount  of  ninety  millions  a  year.  Do  you  think  it 
would  be  safe  to  undertake  resumption  with  that  burden 
resting  upon  us  ? 

Secretary  Sherman.  Clearly.  If  we  have  the  power  to 
reissue  legal-tender  notes  at  par,  and  the  power  to  sell  bonds, 
if  necessary,  we  can  undoubtedly  keep  the  notes  at  par.  Re- 
demption would  not  go  far  before  legal-tender  notes  would 
become  scarce.  I  have  stated  that  there  were  $70,000,000  of 
those  legal-tender  notes  in  our  vaults,  and  there  are  also 
$70,000,000  of  them  in  the  custody  of  the  national  banks, 
whose  interest  it  would  be  to  keep  them  in  their  vaults. 

Mr.  Phillips.  Would  it  not  be  more  to  their  interest  to 
have  the  coin  ? 

Secretary  Sherm.-vn.  These  legal-tender  notes  are  scat- 
tered all  over  the  country.     *     *     * 

Mr.  Phillips.  The  interest  of  the  banks  to  get  the  gold 
might  prompt  them  to  send  in  these  greenbacks  for  redemp- 
tion. 

Secretary  Sherman.  If  you  ask  me  whether  347  millions 
of  legal-tender  notes  can  be  all  paid  with  a  hundred  millions 
of  coin,  if  they  are  all  presented  on  the  same  day,  I  will  say 
no;  but,  with  600  millions  of  currency,  you  cannot  purchase 
all  the  wheat  and  corn  in  the  country  in  the  same  day. 

Mr.  Phillips.  Will  not  the  mere  act  of  resumption  create 
a  demand  for  gold  which  docs  not  now  exist  ? 

Secretary  Sherman.  On  the  contrary,  I  think  it  will  di- 
minish the  demand  for  gold.  What  would  they  want  gold 
for? 

Mr.  Phillips.  These  banks  may  wish  to  resume. 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


59 


Secretry  Sherman.  They  would  rather  resume  in  green- 
backs.    They  deposit  their  gold  with  us  for  safe-keeping. 

Mr.  Fort.  Would  there  not  be  a  temptation  for  the  banks 
to  e.xchange  their  greenbacks  for  gold  "i 

Secret .4RY  Sherman.  I  do  not  see  what  object  they  would 
have' in  doing  it. 

Mr.  Fort.  They  would  do  it  merely  for  the  premium. 

Secretary  Sherman.  But  there  would  not  be  any  pre- 
mium.    *    *    * 

Mr.  Ewing.  It  strikes  me  that  the  addition  of  seventeen  or 
eighteen  millions,  drawn  from  these  four  items,  is  not  safe  in 
calculating  the  resources  for  resumption. 

Secretary  Sherman.  I  think  that  if  you  ask  any  banker 
in  New  York  how  much  of  that  fund  is  available  for  resump- 
tion purposes,  he  will  put  it  higher  than  I  do. 

Mr.  Ewixg.  As  a  banker? 

Secretary  Sherman.  As  long  as  we  are  issuing  United 
States  notes,  redeemable  on  demand,  we  are  in  the  banking 
business. 

Mr.  Ewing.  And  take  the  bankers'  chances  ? 

Secretary  Sherman.  We  do  it  as  a  matter  of  course. 
We  save  the  interest,  and  have  to  do  as  bankers  do.    • 

The  Secretary  assumes  that,  as  a  certain  amount 
of  coin  remained  in  the  Treasury,  represented  dur- 
ing suspension  of  payments  by  certificates,  a  far 
greater  amount  will  remain  in  it  after  resumption, 
the  government  notes  being  a  more  convenient 
currency.  Suppose  he  were  to  issue  certificates 
similar  to  those  now  u.sed  to  the  extent  of  $340,- 
000,000  upon  a  deposit  of  §120,000,000,  making 
them  legal  tender  to  be  paid  out  by  him  to  suit 
his  convenience  or  necessities,  upon  demand  for, 
and    in   place   of   coin.     Would   they   circulate  at 


Co     RESUMPTION  AND  THE  SILVER  QUESTION. 

the  par  of  coin  ?  Instead  of  this,  would  not  only 
deposits  cease  to  be  made,  but  would  not  every 
holder  seek,  if  possible,  to  draw  the  coin  ?  Gold 
is  now  deposited  in  the  Treasury  as  a  matter  of 
convenience  in  the  payment  of  duties;  payments  in 
such  case  being  little  more  than  a  matter  of  book- 
keeping. It  is  hardly  possible  that  government 
should  not  receive  its  certificates  of  deposits  in  pay- 
ment of  the  revenues.  So  long  as  it  is  believed 
that  they  will  be  so  received,  coin  may  continue 
to  be  deposited.  The  certificates  are  assumed  to 
represent  specific  sums  which  cannot  be  appropri- 
ated to  any  purpose  but  their  payment.  It  will  be 
wholly  different  with  the  gold  held  for  the  green- 
backs :  these  are  not  certificates  of  deposits  of  coin 
especially  set  apart  for  their  redemption,  and  which 
the  government  can  apply  to  no  other  use.  Why 
upon  resumption  should  any  considerable  amount 
of  coin  be  deposited  with  the  government  ?  What 
would  be  received  in  exchange  ?  Greenbacks — 
having  a  provision  for  payment  equaling  one-third 
their  nominal  amount.  Would  not  the  holders  of 
coin  take  it  to  banks  which,  by  using  it  as  a  reserve, 
could  discount  the  bills  of  those  taking  it  to  them 
to  an  amount  five  times  greater  than  that  of  the 
gold  deposited  ?  The  Secretary  wholly  miscon- 
ceives the  function  of  gold  in  relation  to  a  cur- 
rency. It  is  not,  nor  will  it  ever  be,  the  basis  of  a 
currency.  Its  use  is  to  supplement  such  basis — 
merchandise — precisely  as  the  reserves  of  a  drawer 


RESUMPTION  OF  SPECIE  PA  YMENTS.  6 1 

of  bills  are  held  to  take  in  such  as  may  not  be  paid, 
or  to  meet  any  reclamation  on  account  of  a  deficit 
of  that  against  which  the  bills  were  drawn.  If  coin 
were  to  be  loaned,  the  thing  itself  would  be  loaned, 
instead  of  resorting  to  the  expensive  and  cumbrous 
process  of  issuing  notes  against  it.  Whatever  the 
amount  of  gold  in  the  country  not  required  in  the 
arts,  or  by  way  of  change,  or  as  reserves  for  indi- 
viduals, this  will  always  be  held  by  banks  and  bank- 
ers in  support  of  their  issues.  All  not  required  for 
the  purposes  named  will  be  exported.  Government 
is  not  a  discounter  of  paper.  It  has  no  occasion 
to  hold  a  dollar;  nor  can  it  hold  a  dollar,  in  addi- 
tion to  that  required  in  the  discharge  of  its  ordi- 
nary and  proper  duties,  that  can  be  drawn.  Any 
accumulation  it  might  make  would  only  serve  as 
the  source  of  supply  for  those  who  could  put  it  to 
its  proper  use,  for  which  government  has  no  function 
whatever. 

The  statement  that  upon  resumption  the  public 
Treasury  is  to  become  the  depository  of  the  coin 
of  the  nation  is  too  absurd  to  be  mischievous.  A 
statement  of  a  much  graver  character,  from  having 
unfortunately  a  semblance  of  truth,  is  that  the  gov- 
ernment of  the  United  States  is  in  the  "banking 
business!"  enacting  a  role  which  no  other  govern- 
ment ever  yet  attempted,  and  which,  it  is  to  be 
hoped,  after  our  experience,  no  other  government 
ever  will  attempt.     What  is  a  banker?     One  who 


Ci2     l^ESUMTTIOX  AND  THE  SILVER  QUESTION. 

receives  on  deposit  the  money  of  others,  allowing 
usually  a  moderate  rate  of  interest,  and  reloaning 
it  at  a  higher  rate,  the  difference  being  his  profit. 
What  has  the  government  to  loan  ?  Nothing. 
What  does  it  propose  to  loan  ?  Nothing.  It  issues 
its  notes,  which  are  neither  capital  nor  the  repre- 
sentative of  capital.  It  receives  no  interest  on 
them,  for  tlie  reason  that  they  do  not  secure  to 
their  holder  an  equal  nominal  amount  of  capital. 
If  any  other  "  banker"  should  attempt  a  like  role, 
he  would  be  hooted  out  of  the  country  as  an  im- 
postor and  fraud.  What  if  all  of  our  bankers  con- 
ducted their  operations  in  a  similar  manner? 
Would  not  all  our  interests  be  speedily  involved  in 
utter  confusion  and  ruin?  Are  not  the  depression 
in  business  and  the  financial  and  commercial  dis- 
asters of  the  past  five  years  in  great  measure  due 
to  the  entrance  into  the  field  of  affairs  of  this  new 
banker,  colossal  in  his  proportions,  whose  capital 
is  debt  created  some  sixteen  years  ago  to  supply 
the  waste  of  war,  the  evidences  of  such  debt  being 
,  made  the  basis  of  the  whole  financial  system  of  the 
nation  ?  That  the  Secretary's  statement  that  this 
new  banker  is  not  only  to  remain  in  business,  but 
is  to  become  the  centre  of  the  financial  and  mone- 
tary operations  of  the  country,  should  not  have 
challenged  a  word  of  opposition  or  criticism,  on 
the  part  of  either  of  the  two  most  important  com- 
mittees of  Congress,  but,  on  the  contrary,  should 
be  received  with  expressions  of  entire  approbation 


RESUMPTION  OF  SPECIE  PA  YMENTS.  63 

and  assent,  shows  how  little  understood  is  the 
mighty  problem  now  agitating  the  country,  and 
to  what  a  desperate  pass  the  nation  has  fallen. 

Mr.  Ewing.  That  $45,000,000,  assumed  to  be  held  by  the 
national  banks,  and  whatever  amount  you  have  in  the  Treas- 
ury belonging  to  the  United  States  applicable  to  resumption, 
represents  the  whole  preparation  for  the  redemption  of  the 
$647,000,000  of  paper  money  ?     *     *     * 

Secretary  Sherman.  The  banks  do  not  have  to  redeem 
any  notes  in  gold  ;  they  redeem  in  United  States  notes. 

Mr.  Ewing.  After  all,  the  problem  is  to  float  $647,000,000 
of  paper  money  redeemable  in  coin. 

Secretary  Sherman.  Yes. 

Mr.  Ewing.  Now,  is  not  the  drain  upon  the  government 
practically  the  same  to  the  extent  of  the  aggregate  of  the 
greenback  circulation  ($348,000,000),  as  though  the  entire  cir- 
culation were  money  ? 

Secretary  Sherman.  I  say  no,  emphatically  ;  and  all 
experience  in  other  systems  of  banks  would  also  say  no. 
The  iruth  is^  the  Covcrtitneni  of  the  United  States  has 
nothing;  to  do  ivith  the  banks  any  more  than  it  has  to  do 
with  the  other  corporations  and  merchants  of  the  country. 
The  banks  are  as  separate  and  distinct  corporations  as  they 
can  possibly  be  made.  The  United  States  has  got  to  re- 
deem $348,000,000  of  legal-tender  notes,  or  to  make  them  at 
par  with  coin.  You  recollect  what  I  said  before,  that  we 
liave  seventy  millions  undisputed  money  in  coin, 

Mr.  Ewing.  I  beg  leave  to  say  that  I  regard  the  statement 
as  incorrect. 

Secretary  Sherman.  I  say  no  ;  you  have  no  confidence. 

Mr.  Ewing.   I  have  met  very  few  who  have  confidence. 

Secretary  Sherman.  I  say  that  if  you  strengthen  this 
reserve  from  seventy  millions  to  from  one  hundred  and  twen- 
ty millions  to  one  hundred  and  fifty  millions,  with  power  in 


64     RESUMPTION  AND  THE  SILVER  QUESTION. 

the  Secretary  of  the  Treasury  to  sell  bonds  if  necessary,  and 
with  power  to  reissue  greenbacks,  there  is  no  danger  of 
breaking  the  government.  - 1  do  not  think  that  anybody 
desires  that. 

Mr.  Ewing.  My  question  was  this  :  Whether  the  General 
Government,  to  the  extent  of  its  wliole  paper  circulation  out- 
standing, must  not  respond  to  the  demands  of  the  holders  of 
the  $647,000,000  of  paper  currency  for  conversion  into  coin  .? 

Secretary  Sherman.  The  government  is  bound  to  re- 
spond, to  the  extent  of  the  amount  of  United  States  notes 
outstanding,  but  not  one  step  fartlier. 

Mr.  Ewing.  Of  course  not. 

Secretary  Sherman.  Very  well.  That  is  only  $300,000,000. 
It  is  just  as  it  Great  Britain  was  behind  that  $300,000,000  of 
bank-notes — a  separate  and  distinct  power.  We  are  under 
no  oblicration  to  redeem  the  national-bank  notes.     *     *     * 

Mr.  Ewing.  Suppose  that  through  lack  of  confidence  in 
your  ability  to  maintain  resumption,  with  the  small  accumu- 
lation of  gold  that  you  can  obtain,  there  should  be  a  demand 
for  fifty  millions  of  coin  in  any  one  month  in  New  York. 

Secretary  Sherman.  It  is  scarcely  a  supppsable  proposi- 
tion that  you  put  to  me  that  they  could  gather  together  in  one 
mass  an  amount  of  legal-tender  notes  to  break  the  Treasury 
if  this  reserve  is  anything  like  what  I  say.  *  *  *  The 
idea  of  accumulating  $75,000,000  or  $100,000,000  of  United 
States  notes  and  carrying  them  to  the  Treasury  in  the  course 
of  a  month  is  practically  impossible.  The  commencement  of 
such  a  scheme  as  that  would  make  legal-tender  notes  so 
scarce  that  it  would  be  impossible  to  get  them,  and  the  very 
scarcity  would  increase  their  value  so  that  they  would  be 
equal  to  coin, 

Mr.  Ewing.  They  could  very  readily  present  at  least  their 
coin-certificates  for  redemption. 

Secretary  Sherman.  Where  are  they  ?  Scattered  all 
over  the  country.     The   whole  amount  of  money,  including 


RESUMPTION  OF  SPECIE  PA  YMENTS.  65 

currency  certificates  in  the  city  of  New  York,  wliich  is  the 
great  commercial  deposit  of  the  country;  is  only  twenty  mil- 
lion dollars,  and  they  never  get  more  than  that.  That  is  the 
amount  of  the  aggregate.  If  they  gathered  every  note  and 
every  certificate  in  all  the  national  banks  of  New  York,  they 
would  not  amount  to  twenty  millions  of  dollars  ;  and  is  it  to  be 
supposed  that  they  would  do  that  ?  Unless  you  maintain  that 
we  require  to  have  as  much  gold  on  hand  as  there  is  paper 
money  outstanding  before  we  can  have  resumption,  I  do  not 
see  any  difficulty  about  it. 

The  idea  of  the  Secretary  in  the  preceding  para- 
graphs, if  any  idea  can  be  gained  from  them,  seems 
to  be  this:  If  government  be  strong  enough  to  in- 
spire confidence,  none  of  its  notes  will  be  demanded 
in  coin — not  one  dollar  in  a  hundred,  as  will  be 
seen  farther  on.  If  upon  a  demand  for  a  million, 
he  can  reply  with  "  Sir,  you  can  have  fifty  mil- 
lions!"-such  assurance  of  strength,  he  assumes, 
will  put  to  shame  and  drive  from  his  presence, 
and  before  a  dollar  be  drawn,  every  disturber  of 
his  and  the  public  quiet.  So  long,  he  claims, 
as  confidence  is  maintained,  no  one  will  draw,  or 
wish  to  draw,  a  dollar  of  coin,  from  the  greater  con- 
venience of  notes,  and  from  their  being  so  scattered 
up  and  down  the  country  that  it  will  bo  almost 
impossible  to  get  together  any  considerable  sum; 
and  from  the  fact  that  as  soon  as  a  small  quantity 
is  drawn,  they  will  become  more  valuable  from 
their  scarcity  than  gold.  In  reply  to  all  this  it 
has  been  sufficiently  shown  that  all  paper  money, 
whosoever  the  issuer,  will  be  drawn  in  the  ordinary 


66     RESUMPTION  4^'D  THE  SILVER  QUESTION. 

course  of  business,  say  within  ninety  days,  for  the 
sake  of  reaching  its  constituent.  If  issued  against 
merchandise,  the  ordinary  subjects  of  consumption, 
this  will  be  presently  taken  for  consumption.  If 
issued  against  coin,  this  will  be  presently  drawn  to 
be  applied,  as  capital,  to  its.  proper  uses — to  be 
exported,  to  be  used  in  the  arts,  or  held  as  reserves 
by  corporate  or  private  issuers  of  currency.  Gov- 
ernment cannot  ordinarily  put  it  to  such  uses  as 
these,  at  least  with  the  same  advantage  as  the 
public.  It  is  not  in  trade ;  it  is  not  engaged  in  the 
production  of  merchandise;  it  cannot  discount  bills 
drawn  against  such  merchandise,  holding  its  coin 
in  reserves  for  issues  equaling  say  five  times  its 
amount.  Should  it  attempt  to  compete  in  the 
issue  of  currency,  providing  a  proper  basis  there- 
for, it  would  be  speedily  and  ignominiously  driven 
from  the  field.  It  might  just  as  well  hope  to  com- 
pete in  the  cultivation  of  crops  for  sale,  or  in  the 
production  of  merchandise,  as  to  attempt  to  do  so 
in  the  proper  and  legitimate  use  of  the  precious 
metals,  so  far  as  relates  to  the  issue  of  paper 
money  or  to  production  and  trade. 

As  banks  must  resume  with  the  government,  what 
amount  of  reserve  must  they  hold  to  resume  with 
safety?  Ordinarily,  that  is  in  periods  of  quiet  and 
prosperity,  the  proportion  of  coin  reserves  to  liabil- 
ities, deposits  as  well  as  notes,  equals  in  this  coun- 
try one-fifth,  or  twenty  per  cent.     Upon  resumption. 


RESUMPTION  OF  SPECIE  PA  YMENTS.  6/ 

after  suspension,  the  proportion  of  reserves  is  always 
to  be  largely  increased  to  meet  extraordinary  calls 
to  which  the  banks  may  be  exposed.  Their  liabil- 
ities are  all  due  on  demand.  The  greater  part  of 
their  means  is  in  their  bills  receivable,  payable  at  a 
future  day.  Their  issues,  or  a  portion  of  them, 
from  apprehension  excited  by  the  remembrance  of 
past  disasters,  or  distrust  in  the  present  soundness 
of  the  community,  or  of  the  solvency  of  any  con- 
siderable portion  of  the  makers  of  the  bills  dis- 
counted, are  liable  to  be  immediately  presented  for 
coin.  Upon  resumption,  therefore,  reserves  con- 
siderably exceeding  the  average  have  to  be  accu- 
mulated and  maintained  till  the  general  solvency 
is  established  and  confidence  fully  restored.  The 
Bank  of  England,  when  it  resumed  in  1821,  held 
;{J' 1 1,233,000  against  ^^26,05 1,000  of  notes  and  de- 
posits, the  proportion  of  reserves  to  liabilities  be- 
ing 43  per  cent.  Upon  final  resumption  in  1843" 
after  the  suspension  of  1837,  the  banks  of  the 
United  States  held  $33,515,806  of  coin  against 
$1 14,732,226  of  notes  and  deposits,  the  proportion 
of  coin  to  liabilities  being  about  29  per  cent.  When 
they  resumed  after  the  suspension  of  1857,  they 
held  $104,537,818  of  coin  against  $341,140,693  of 
notes  and  deposits,  the  proportion  of  the  former  to 
the  latter  being  the  same  as  in  1843.  The  notes 
and  deposits  of  the  national  and  State  banks  at 
the  present  time  equal  $1,250,000,000.  To  resume, 
therefore,  with  any  degree  of  safety,  they  must  hold 


68     RESUMPTION  AND   THE  SILVER  QUESTION. 

coin  reserves  equaling  fully  $300,ooo,cxDO.  From 
Avhat  source  is  this  vast  sum  to  be  supplied?  They 
now  hold,  including  certificates  of  deposits,  say 
$50,000,000.  The  Secretary  proposes  to  accumulate 
in  addition,  say  $125,000,000,  the  two  sums  equal- 
ing $175,000,000.  Assuming  the  whole  amount  of  his 
provision  to  be  available,  there  will  still  be  a  deficit 
of  $125,000,000.  Where  is  this  to  come  from?  But 
the  accumulations  of  government  are  by  no  means 
to  be  counted  upon  by  the  banks,  as  in  case  of  a  heavy 
run  upon  it,  the  government,  as  the  Secretary  de- 
clares, would  suspend.  There  is  no  coin  in  the  coun- 
try outside  the  banks  and  the  Treasury.  Resump- 
tion, therefore,  upon  his  programme,  either  by  the 
government  or  by  the  banks  is  an  impossibility. 
The  government  cannot  resume  without  full  pro- 
vision for  its  notes  ;  the  banks  cannot,  without  a  pro- 
vision in  coin,  or  of  government  notes,  to  serve  as 
their  reserves,  of  at  least  $300,000,000.  To  at- 
tempt such  a  step  upon  the  provision  to  be  made  is 
simply  to  court  defeat  and  disaster.  The  Secretary 
cannot  imagine  why  the  banks  should  want  to 
draw  his  coin,  for  the  reason  that  he  appears  to 
have  no  conception  of  the  nature  and  laws  of  a  sym- 
bolic currency.  He  regards  money,  whether  of  coin 
or  paper,  as  only  a  scale  of  valuation,  an  instrument 
for  determining  the  relative  price  of  the  subjects 
of  exchange ;  forgetting  that  when  intrinsic  it  is 
always  one  of  the  subjects  of  exchange ;  and  wlien 
symbolic,  that  which  it  represents  must,  when  the 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


69 


symbol  is  used,  become  a  subject  of  exchange; 
the  symbol-always" disappearing  by  the  use  of  the 
constituent.  He  will  find,  when  he  attempts  to 
resume,  that  he  js  no  longer  in  the  land  of  dreams 
and  shadows,  but  of  stern  realities  ;  that.every  note 
which  he  issues,  \v\\\,  in  the  ordinary  course  of 
business,  speedily  return  to  him  for  payment ;  and 
that  a  graceful  genuflection,  or  courteous  wave  of 
the  hand,  will  not,  as  he  now  assumes,  be  accepted 
as  the  equivalent  for  $340,000,000  of  solid  gold. 

"  The  Government  of  the  United  States,"  says 
the  Secretary,  "  has  nothing  to  do  with  the  banks, 
any  more  than  it  has  to  do  with  other  corporations 
and  merchants  of  the  country,"  The  exact  opposite 
is  the  fact ;  it  has  to  do  with  them  as  it  has  with  no 
other  corporations  or  merchants  of  the  country. 
The  government  is  an  issuer  of  currency;  the  banks 
arc  issuers  of  currency  based  on  that  of  the  govern- 
ment. Its  notes  arc  by  law  their  reserves  where- 
with to  discharge  their  obligations.  The  banks 
must  upon  resumption  pay  in  coin,  as  well  as  in  the 
notes  of  the  government,  their  deposits  as  well  as 
their  own  notes.  They  arc  required  to  hold  a  cer- 
tain amount  of  government  notes  as  reserves  against 
their  deposits.  For  the  whole  amount  of  the  liabili- 
ties of  the  banks,  the  government,  if  called  upon, 
must  supply  the  coin.  The  two  form  one  system 
inseparably  connected.  If  the  Secretary  would  re- 
sume, he  must  carry  the  banks  upon  his  own 
shoulders;    that  is,  he  must,  by  virtue  of  issuing 


yo     RESUMPTION  AND   THE  SILVER  QUESTION. 

their  legal-tender  reserves,  provide  whatever  coin 
they  may  need  in  their  operations.  But  the  gov- 
ernment must  hold  reserves  as  well  as  the  banks. 
Its  reserves  must  equal  the  whofe  amount  of  its 
liabilities,  as  it  has  nothing  but  its  reserves  for 
the  discharge  of  its  notes.  The  banks  hold,  in 
addition  to  their  reserves,  ample  means  for  the 
discharge  of  all  their  liabilities.  The  govern- 
ment, consequently,  instead  of  being  able  to  help 
the  banks  to  the  extent  of  a  single  dollar,  must 
provide  for  itself  an  amount  of  coin  equal  to  its 
outstanding  notes.  Should  it  do  this,  and  could 
the  banks  draw  it,  they  could  resume,  and  main- 
tain resumption  ;  but  resumption  by  them  would 
retire  every  note  of  the  government.  In  fact,  re- 
sumption by  banks  is  possible  only  by  the  com- 
plete abandonment  of  the  field  by  the  government 
as  an  issuer  of  currency. 

Mr.  Ewing.  The  Bank  of  England  has  on  hand  in  gold 
coin  and  bullion  $120,000,000,  and  in  the  banking  department 
$59,000,000  of  notes. 

Secretary  Sherman.  According  to  that  the  Bank  of 
England  has  got  $179,009,000  with  which  to  pay  $266,000,000. 
The  total  amount  of  demand  liabilities  on  us  is  $407,000,000, 
and  the  total  amount  of  coin  and  currency  on  hand  $208,000,- 
000.  Add  to  that  such  an  additional  reserve  as  I  propose  to 
accumulate  of  $50,000,000,  and  it  would  make  it  $258,000,000 
to  meet  $407,000,000,  which  is  just  about  the  proportion,  ac- 
cording to  the  figures  you  give  me,  of  $179,000,000  held  by 
the  Bank  of  England  to  meet  its  liabilities  of  $266,000,000. 
The  disparity  is  not  so  great.     *     *     * 


RESUMPTION  OF  SPECIE  PA  YMENTS.  yi 

Mr.  Ewixg.  Will  the  reissue  of  legal-tender  notes  help  you 
to  maintain,  resumption  ? 

Secretary  Sherman.  Yes  ;  to  have  the  power  to  reissue 
them  ;  for  if  the  greenbacks  can  be  retained  at  par,  and  we 
can  reissue  them,  it  will  save  us  from  issuing  bonds.  We 
would  only  reissue  greenbacks  in  exchange  for  coin  or  its 
equivalent.  We  would  reissue  them  in  payment  of  coin  in- 
terest, but,  as  a  matter  of  course,  we  could  not  reissue  them 
unless  they  were  equal  to  coin,  just  as  the  Bank  of  England 
would  not  issue  a  single  note  unless  it  was  worth  gold.  We 
go  on  the  supposition  that  the  legal  tenders  are  on  par  with 
gold.     *     *     * 

Mr.  Ewixg.  You  would  reissue  them  for  the  purpose  of 
increasing  your  coin  supply  ? 

Secretary  Sherman.  Yes,  sir  ;  practically.  The  public 
would  be  very  willing  to  take  the  greenbacks  if  they  were  at 
par  with  coin,  and  as  a  matter  of  course  they  would  be  sub- 
stitutes for  coin. 

Mr.  Evving.  Did  I  understand  you  to  say  that  a  demand 
lor  half  of  twenty-five  million  pounds  sterling  on  the  Bank  of 
England  would  break  the  bank  ? 

Secretary  Sherman.  I  do  not  know  how  much  the  re- 
ser\'e  of  the  Bank  of  England  is  now,  but  the  Bank  of  Eng- 
land, like  all  banks,  owes  vast  amounts  of  demand  liabilities 
besides  their  notes.  It  holds  the  deposits  of  England.  Every 
banking  house  in  England  almost  has  an  account  in  the 
Bank  of  England  ;  and,  therefore,  the  danger  which  threatens 
the  Bank  of  England  would  be  the  calling  in  of  the  deposits, 
and  if  notes  to  the  amount  of  ten  million  pounds  sterling 
were  presented,  in  addition  to  the  call  of  depositors,  there 
would  be  such  a  draft  upon  the  resources  of  the  bank,  that 
the  bank  would  have  to  suspend.  But  the  advantaf^c  of  our 
government  now  is  that  we  have  no  demand  liabilities  not 
covered  by  actual  money  on  hand.  *  *  *  Take  the  clemand 
liabilities  upon  the  United  Stales  and  add  them  all  together, 


72      RESUMPTION  AAW  THE  SILVER  QUESTION. 

and  then  take  all  the  money  that  we  have  got  in  the  Treasury, 
and,  I  repeat,  we  are  in  a  better  condition  than  the  Bank  of 
England  is. 

The  Treasury  of  the  United  States,  says  the 
Secretary,  is  stronger  than  the  Bank  of  England,  for 
the  reason  that  the  former  has  no  HabiHties  not 
covered  by  actual  money  in  hand.  The  demand 
liabilities  of  the  Bank  of  England  are  its  whole  in- 
debtedness— its  notes  and  deposits.  Those  of  the 
Treasury  are  its  certificates  of  deposit  of  a  corre- 
sponding amount  of  gold  and  appropriated  balances, 
liable  at  any  moment  to  be  drawn.  All  these  are 
covered  by  cash  in  hand.  The  legal-tender  notes 
are  not  demand  liabilities.  They  are  payable  only 
at  the  pleasure  of  the  issuer.  In  this  view,  the 
Treasury  is  stronger  than  the  Bank,  as  the  latter 
must  cash  all  its  liabilities  as  presented  or  break. 
Its  notes  are  not  legal  tender  in  the  payment  of  its 
own  indebtedness.  But  is  the  superior  strength  of 
the  Treasury,  resulting  from  the  fact  that  its  notes 
are  not  demand  liabilities,  likely  to  help  the  Secre- 
tary to  maintain  the  notes  at  the  par  of  coin? 

In  proof  of  the  superior  strength  of  the  Treasury 
over  the  Bank,  the  Secretary  offered  the  following 
tables  illustrative  of  the  condition  of  the  latter,  as  it 
was  on  the  28th  of  February,  1878: 

ISSUE  DEPARTMENT. 

Notes  issued ;^38,698,o2o    Government  debt ;£ii,oi5,ioo 

Other  securities 3,984,900 

Gold  coin  and  bullion 23,698.020 


;{;  38,698,020 


£2i^,6gi,02o 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


n 


BANKING  DEPARTMENT. 


Proprietors'  capital ;f  i4.S53.ooo 

Rest 3,414,161 

Public  deposits,  including 
Exchequer,  savings  banks, 
corAmissioners  of  national 
debts  and  dividend  ac- 
counts           6,524,776 

Other  deposits 21,529,721 

Seven-day  and  other  bills.  255,619 


;C46,277,277 


Government  securities. . . 

Other  securities 

Notes 

Gold  and  silver  coin 


;£l5,203,20I 

17.672,338 
12,368,965 

1.032.773 


£,\(>,in,2n 


Dated  February  28, 1878. 


F.  MAY, 

Chief  Cashier. 


THE  OLD  FORM. 
The  above  bank  accounts  would,  if  made  out  in  the  old  form,  present  the  follow- 
ing results : 

Liabilities.  Assets. 


Circulation  (including  bank 

post-bills)    ;£26,584,674 

Public  deposits 6,524,776 

Private  deposits 21,529,721 


;CS4.639.i7i 


Securities ;C33.322.S39 

Gold  and  bullion 24,730,793 


;C58.o53,332 


The  balance  of  assets  above  liabilities  being  ;£3,4i4,i6i,  as  stated  in  the  above 
account  under  the  head  "  Rest." 

Now,  continued  the  Secretary,  in  regard  to  the  United 
States,  I  have  a  statement  here  showing  the  apparent  and 
probal)Ie  condition  of  the  United  States  Treasury  on  April  i, 
1878,  and  on  the  1st  of  January  ne.\t.  The  only  difference  in 
these  statements  is  that  I  add  to  the  present  condition  of  the 
Treasury  the  proposed  accumulation  of  fifty  millions  of  coin, 
and  a  substantial  payment  before  that  of  the  fractional  cur- 
rency. I  think  it  will  be  practically  redeemed  before  that 
time.  The  actual  results  show  the  amount  of  demand  liabili- 
ties on  April  i,  1878,  against  the  United  States  as  $460,527,- 
374,  and  they  show  the  demand  resources,  including  coin  and 
currency,  at  $174,324,459,  making  the  percentage  of  resources 
to   liabilities   38.     To  show  the  probable   condition   of  the 


74 


RESUMPriOM  AND  THE  SILVER  QUESTION. 


Treasury  on  the  ist  of  January,  1879,  ^  ^^^  the  fifty  millions 
of  coin  and  I  take  off  the  fractional  currency,  and  deduct  es- 
timated United  States  notes  lost  and  destroyed,  leaving  the 
other  items  about  the  same.  That  would  show  an  aggregate 
of  probable  liabilities  of  $435,098,400,  and  probable  cash  re- 
sources of  $224,324,459,  making  51  per  cent,  of  the  demand 
liabilities.  The  ratio  ol  the  Bank  of  England,  at  this  time,  is 
45  per  cent. 

Statement  shoiving  the  appare7it  atul  probable  condition  0/  the  Ufiited 
States  Treasury,  including  the  proposed  accumulation  of  $50,- 
000,000  coin. 


Apparent. 

Probable. 

Demand  liabilities. 
Legal-tender  notes v.... 

April,  1878. 

$347,848.71200 

57,883,400  00 

4,121,14677 

8,439,391  04 

25,215,000  00 

16,950,115  62 

62,342  50 

7,267  03 

January,  1879. 
$340,000,000  00 

Coin-certificates 

57,883,400  00 

4,000,000  00 

Currency-certificates 

25,215,000  00 

Unclaimed  Pacific  Railroad  interest 

Totals 

«46o,527,374  96 

4435,098,400  00 

Demand  resources. 
Coin 

April. 
$138,357,608  14 
35,966,851  35 

January. 
$188,357,608  14 

Currency 

35,966,851  35 

Totals 

$174,324,459  49 

$224,324,459  49 

Percentage  of  resources  to  liabilities.   . . 

.38 

•  51 

It  will  be  seen  from  the  statement  of  the  condi- 
tion of  the  Bank  of  England,  that  while  it  has  coin 
reserves  equaling  45  per  cent,  of  all  its  liabilities, 
it  has  available  securities  in  bills  receivable,  the 
greater  part  of  them  speedily  to  fall  due,  far  ex- 
ceeding all  its  liabilities.     To  have  all  the  latter 


RESUMPTION  OF  SPECIE  PA  YMENTS.         75 

taken  in,  it  has  only  to  cease  discounting  for  a 
period  of  sixty  days.  It  will  then  not  only  be 
free  from  debt,  but  have  a  large  amount  of  cash 
in  hand.  The  Secretary,  in  his  statement  of  the 
financial  condition  of  the  United  States  as  an  issuer 
of  currency,  shows  that  it  will  have  in  hand,  on  the 
first  day  of  January,  1879,  $224,324,459,  wherewith 
to  meet  $435,098,400  of  immediate  liabilities;  the 
reserves  in  his  care  equaling  51  per  cent,  of  his  im- 
mediate liabilities,  or  6  per  cent,  greater  than  those 
of  the  Bank  of  England.  But  where  are  the  secu- 
rities to  take  in  the  $210,773,941  of  immediate  lia- 
bilities in  excess  of  his  reserves?  To  be  rhetorical, 
we  might  say,  "  We  pause  for  a  reply  !  "  Suppose 
he  should  cease  to  make  any  further  issues  for  sixty 
days,  what  would  be  his  position  ?  Every  dollar  of 
his  coin  would  be  drawn,  leaving  him  with  liabilities 
exceeding  $200,000,000,  to  meet  which  he  would 
not  have  a  dollar.  So  much  for  the  comparative 
strength  of  the  Bank  of  England  and  the  Govern- 
ment of  the  United  States,  as  issuers  of  currency. 

In  regard  to  our  national  banks,  continues  the  Secretary, 
here  are  some  statements  which  are  interesting  to  me,  and 
which  were  prepared  in  consequence  of  our  interview  the 
other  day.  I  think  they  will  be  interesting  to  the  committee. 
Tiie  first  paper  contains  the  circulation  and  deposits  and  specie 
of  the  State  banks  in  1857  and  i860,  as  compiled  from  state- 
ments in  the  finance  report  of  1876,  pages  204  and  205.  The 
next  paper  contains  the  circulation,  deposits,  and  cash  reserve 
of  the  national  banks  on  the  28th  day  of  December,  1877. 


^6     RESUMPTION  AND  THE  SILVER  .QUESTION. 

The  latest  statement  of  the  banks  I  cannot  give  you,  because 
it  is  not  yet  made  up.  It  was  made  in  March  last,  and  the 
returns  are  not  fully  in.  This  statement  shows  a  general 
demand  liability  of  $960,816,052,  and  it  shows  a  total  cash 
reserve  of  $145,019,338.  The  ratio  of  legal-tender  funds  to 
the  amount  of  circulation  is  48.4  per  cent.  The  ratio  of 
legal-tender  funds  to  circulation  and  deposits  is  15.1  per 
cent.  The  next  paper  exhibits  the  circulation,  deposits,  and 
cash  resources  of  the  national  banks  on  December  28th, 
1877,  on  a  different  basis,  counting  the  amount  of  national 
bonds  owned  by  the  banks  and  deposited  with  the  Treasurer 
as  money.  This  other  table  excludes  them  entirely.  This 
gives  the  same  figures,  but  counting  the  bonds  at  their  nomi- 
nal par  as  money,  it  sliows  this  result  :  Total  amount  of 
liabilities,  $960,816,052,  and  total  amount  of  cash  resources 
(including  four  hundred  and  five  millions  of  bonds)  at  $550,- 
201,055.  The  ratio  of  cash  resources  to  circulation  is  183 
per  cent.,  and  the  ratio  of  cash  resources  to  circulation  and 
deposits  is  57  per  cent. 

Mr.  Ewing.  Do  you  think  that  the  bonds  can  be  counted 
as  cash  ? 

Secretary  Sherman.  Yes  ;  the  bonds  are  all  worth  par 
or  above  in  gold. 

The  Chairman.  The  other  cash  held  by  the  banks  is  legal- 
tender  notes  ? 

Secretary  Sherman.  Yes,  and  coin. 

Mr.  Ewing.  Do  you  think  it  safe  to  count  these  bonds  as 
gold  ?     Is  it  possible  to  convert  them  into  gold  ? 

Secretary  Sherman.  Oh,  yes.    *    *    * 

Mr.  Ewing.  But  I  want  to  know  now  if  you  make  up  that 
table  on  the  theory  that  these  four  hundred  millions  of  bonds 
can  be  turned  into  gold  for  the  purpose  of  resumption  ? 

Secretary  Sherman.  I  make  up  my  statement  on  the 
theory  that  four  hundred  millions  of  bonds  will  ntore  than 
pay/(9«r  hundred  millions  of  bank-notes  at  any  time. 


RESUMPTION  OF  SPECIE  PA  YMENTS.         77 

The  bonds  of  the  United  States  are  deposited  in 
the  Treasury,  as  security  for  the  redemption  of  the 
notes  of  the  banks.  The  inabihty  of  the  latter  to 
redeem  their  issues  is  a  case  of  bankruptcy,  upon 
which  government  undertakes  to  provide  for  their 
notes  by  the  sale  of  the  bonds.  The  bonds  become 
available  for  such  purpose  only  when  the  banks 
are  in  liquidation.  To  count  such  as  cash,  and 
available  to  meet  a  run  for  coin — bonds  of  which, 
or  of  their  proceeds,  they  can  never  get  the  posses- 
sion, but  which  are  to  be  administered  upon  by 
the  government  as  the  assets  of  an  insolvent  and 
defunct  corporation — is  as  absurd  as  it  would  be  to 
count  the  gold  and  silver  to  be  mined  after  the  be- 
ginning of  the  twentieth  century  as  available  by  the 
banks  to  meet  an  emergency  occurring  on  the  ist 
day  of  January,  1879.  With  the  Secretary,  money 
seems  to  be  an  idea,  not  a  sober  fact,  and  payment 
a  ceremony  in  which  nothing  passes  heavier  than  a 
graceful  gesture  or  a  few  honeyed  words.    • 

Mr.  Ewing.  Do  you  expect  to  pay  out  the  silver  dollar 
coined  by  you  for  current  expenses,  or  only  for  coin  liabili- 
ties, or  to  hoard  it  for  resumption  ? 

Secretary  Sherman.  I  expect  to  pay  it  out  now  only  in 
exchanj^e  for  gold  coin  or  for  silver  bullion.  I  am  perfectly 
free  to  answer  the  question  fully,  because  on  that  point,  after 
consulting  with  many  members  of  both  Houses,  I  have  made 
up  my  mind  what  the  law  requires  me  to  do.  I  propose  to 
issue  all  the  silver  dollars  that  are  demanded  in  exchange  for 
gold  coin.  That  has  been  going  on  to  some  extent ;  how  far, 
I  cannot  tell.     Then  I  propose  to  use  the  silver  in  payment 


78     RESUMPTION  AND  THE  SILVER  QUESTION. 

for  silver  bullion,  which  I  can  do  at  par  in  gold.  I  then  pro- 
pose to  buy  all  the  rest  of  the  silver  bullion  which  I  need  un- 
der the  law  with  silver  coin.  As  a  matter  of  course,  in  the 
current  course  of  business,  some  ot  that  silver  coin  will  go 
into  circulation  ;  how  much,  I  do  not  know.  The  more,  the 
better  for  us.  But  most  of  it,  I  take  it,  will  be  transferred  to 
the  Treasury  for  silver-certificates  (that  seems  to  be  the  idea 
of  the  bill),  and  those  silver-certificates  will  come  into  the 
Treasury  in  payment  of  duties,  and  in  that  way,  practically, 
the  silver  will  belong  to  the  government  again. 

Until  silver  is  so  abundant  that  it  becomes  the  acknowl- 
edged basis  of  coin  transactions,  we  cannot  payout  that  silver 
for  the  ordinary  expenses  of  the  government,  because  we  have 
not  enough  to  pay  all  the  expenditures  in  silver  ;  antl  if  the 
silver  is  maintained  at  par  with  gold,  and  if  the  United  States 
notes  are  below  par  with  gold,  we  cannot  discriminate  in 
favor  of  any  class  of  creditors  ;  we  would,  therefore,  have  to 
hold  silver  at  par  with  gold  until  we  either  have  enough  to 
pay  everything  with  it  or  until  the  legal-tender  notes  are 
practically  at  par  with  gold  and  silver.  That  is  a  matter 
over  which  I  have  no  more  control  than  any  other  citizen. 
The  silver  dollars  being  receivable  for  duties — the  law  allow- 
ing them  to  be  converted  into  certificates  which  are  receiva- 
ble for  customs — I  must  receive  them  ;  and  I  could  not  pre- 
vent, if  I  tried,  the  silver  from  coming  into  the  Treasury, 
either  for  silver  certificates  or  payment  of  duties.  As  to 
when  I  shall  commence  paying  them  out  for  the  current  ex- 
penditures of  the  government  or  in  payment  of  the  interest  or 
principal  of  the  debt,  I  cannot  tell,  because  that  would  depend 
upon  the  equality  of  the  three  kinds  of  currency — gold,  sil- 
ver, and  paper.  I  do  not  know  whether  I  make  myself  un- 
derstood, but  that  is  the  general  idea  I  have  in  my  mind.  As 
a  matter  of  course,  it  being  a  great  discretionary  power 
which  you  have  invested  in  the  office  of  Secretary  of  the 
Treasury,  while  I  hold  the  office  I  will  be  very  careful  toexer- 


RESUMPTION  OF  SPECIE  PA  YMENTS.  79 

cise  that  power  so  as  to  carry  out  in  good  faith  the  law  as 
Congress  has  -passed  it,  and  that  law,  I  think,  contemplates 
that  gold,  silver,  and  paper  shall  be  all  brought  on  an  equiv- 
alency. 

Instead  of  replying  to  the  assumption  by  the 
Secretary  of  creative  power,  by  means  of  which 
"  the  three  kinds  of  money,  gold,  silver,  and  paper, 
are  to  be  brought  to  an  equality  of  value,"  let  us 
take  the  most  instructive  example  which  history 
affords  of  the  effect  of  currencies  of  different  intrin- 
sic, but  of  equal  denominational,  value,  and  of  the 
action  of  a  great  nation  in  face  of  the  difficulties 
which  now  confront  »the  people  of  the  United 
States.  In  1696,  it  was  proposed  to  call  in  the 
outstanding  silver  coins  of  England,  which  were 
greatly  reduced  in  value  by  abrasion  and  clipping, 
and  issue,  in  their  place,  coins  of  full  weight.  This 
proposition  at  once  raised  in  its  full  breadth  the 
question  precisely  similar  to  that  now  raised  in  the 
United  States;  whether  coin — money — circulates 
at  its  denominational  or  at  its  bullion  value. 

"  The  politicians  of  that  age,"  says  Macaulay,  in  his  graphic 
picture  of  it,  "  marveled  exceedingly  that  everybody  should 
be  so  perverse  as  to  use  light  money  in  preference  to  good 
money.  In  other  words,  they  marveled  that  nobody  chose  to 
pay  twelve  ounces  of  silver  when  ten  ounces  would  serve  the 
turn.  The  horse  at  the  Tower  still  |)aced  his  rounds  ;  fresh 
wagon-loads  of  choice  money  still  came  forlli  from  tlic  mill  ; 
and  still  it  vanished  as  fast  as  it  appeared.  Cereal  masses 
were  melted  down ;  great  masses  were  exported ;  great 
masses  were  hoarded ;  but  scarcely  one  new  piece  was  found 


8o     I^ESCMP  TION  A ND   THE  SIL  VER  Q  UE S TION. 

in  the  till  of  the  shop  or  in  the  leathern  bag  which  the  farmer 
carried  home  .from  the  cattle-fair.  In  the  receipts  and  pay- 
ments of  the  exchequer  the  milled  money  did  not  exceed  ten 
shillings  in  the  hundred  pounds.  A  writer  of  that  age  men- 
tions the  case  of  a  merchant  who  in  the  sum  of  tiiirty-four 
pounds  received  only  a  single  half-crown  in  milled  silver. 

"  The  evils  produced  by  this  state  of  the  currency  were  not 
such  as  have  generally  been  thought  worthy  to  occupy  a  prom- 
inent place  in  history.  Yet  it  may  well  be  doubted  whether 
all  the  misery  which  had  been  inflicted  on  the  English  nation 
in  a  quarter  of  a  century  by  bad  kings,  bad  ministers,  bad 
Parliaments,  and  bad  judges,  was  equal  to  the  misery  caused 
in  a  single  year  by  bad  crowns  and  bad  shillings.  Those 
events  which  furnish  the  best  themes  for  pathetic  or  indig- 
nant eloquence  are  not  always  those  which  most  affect  the 
happiness  of  the  great  body  of  the  people.  The  misgovern- 
ment  of  Charles  and  James,  gross  as  it  had  been,  had  not 
prevented  the  common  business  of  life  from  going  steadily 
and  prosperously  on.  While  the  honor  and  independence  of 
the  state  were  sold  to  a  foreign  power,  while  chartered  rights 
were  invaded,  while  fundamental  laws  were  violated,  hun- 
dreds of  thousands  of  quiet,  honest,  and-  industrious  families 
labored  and  traded,  ate  their  meals,  and  lay  down  to  rest,  in 
comfort  and  security.  Whether  Whigs  or  Tories,  Protest- 
ants or  Jesuits,  were  uppermost,  the  grazier  drove  his  beasts 
to  market,  the  grocer  weighed  out  his  currants,  the  draper 
measured  out  his  broadcloth,  the  hum  of  buyers  and  sellers 
was  as  loud  as  ever  in  the  towns,  the  harvest-home  was  cele- 
brated as  joyously  as  ever  in  the  hamlets,  the  cream  over- 
flowed the  pails  of  Cheshire,  the  apple-juice  foamed  in  the 
presses  of  Herefordshire-,  the  piles  of  crockery  glowed  in  the 
furnaces  of  the  Trent,  and  the  barrows  of  coal  rolled  fast 
along  the  timber  railways  of  the  Tyne.  But  when  the  great 
instrument  of  exchange  became  thoroughly  deranged,  all 
trade,  all  industry,  were  smitten  as  with  a  palsy. 


RESUMPTIOX  OF  SPECIE  PA  YMENTS.  gl 

"Since  the  Revolution  the  state  of  the  currency  had  been 
repeatedly  discussed  in  Parliament.  In  1689  a  committee 
of  the  Commons  had  been  appointed  to  investigate  the  sub- 
ject, but  had  made  no  report.  In  1690  another  committee 
had  reported  that  immense  quantities  of  silver  were  car- 
ried out  of  the  country  by  Jews,  who,  it  was  said,  would 
do  anything  for  profit.  Schemes  were  formed  for  encour- 
aging the  importation  and  discouraging  the  exportation  of 
the  precious  metals.  One  foolish  bill  after  another  was 
brought  in  and  dropped.  At  length,  in  the  beginning  of  the 
year  1695,  the  question  assumed  so  serious  an  aspect  that  the 
Houses  applied  themselves  to  it  in  earnest.  The  only  prac- 
tical result  of  their  deliberations,  however,  was  a  new  penal 
law,  which,  it  was  hoped,  would  prevent  the  clipping  of  the 
hammered  coin  and  the  melting  and  exporting  of  the  milled 
coin.  It  was  enacted  that  every  person  who  informed  against 
a  clipper  should  be  entitled  to  a  reward  of  forty  pounds; 
that  every  clipper  who  informed  against  two  clippers  should 
be  entitled  to  a  pardon ;  and  that  whoever  should  be  found 
in  possession  of  silver  filings  or  parings  should  be  burned  in 
the  cheek  with  a  red-hot  iron.  Certain  officers  were  em- 
ployed to  search  for  bullion.  If  bullion  were  found  in  a 
house  or  on  board  of  a  ship,  the  burden  of  proving  that  it 
had  never  been  part  of  the  money  of  the  realm  was  thrown 
on  the  owner.  If  he  failed  in  making  out  a  satisfactory  ac- 
count of  every  ingot,  he  was  liable  to  severe  penalties.  This 
act  was,  as  might  have  been  expected,' altogether  ineffective. 
During  the  following  summer  and  autumn  the  coin  went  on 
dwindling,  and  the  cry  of  distress  from  every  county  in  the 
realm  became  louder  and  more  piercing. 

"  But  happily  for  England  there  were  among  her  rulers 
some  who  clearly  perceived  that  it  was  not  by  halters  and 
branding-irons  that  her  decaying  industry  and  commerce 
could  be  restored  to  health.  The  state  of  the  currency  had 
during  some   time   occupied    the   serious  attention  of  four 

4* 


82     RESUMPTION  AND   THE  SILVER  QUESTION. 

eminent  men,  closely  connected  by  public  and  private  ties. 
Two  of  them  were  politicians  who  had  never,  in  the  midst 
of  official  and  parliamentary  business,  ceased  to  love  and 
honor  philosophy;  and  two  were  philosophers  in  whom  hab- 
its of  abstruse  meditation  had  not  impaired  the  homely  good 
sense  without  which  even  genius  is  mischievous  in  politics. 
Never  had  there  been  an  occasion  which  more  urgently 
required  both  practical  and  speculative  abilities;  and  never 
had  the  world  seen  the  highest  practical  and  the  highest 
speculative  abilities  united  in  an  alliance  so  close,  so  har- 
monious, and  so  honorable  as  that  which  bound  Somers  and 
Montague  to  Locke  and  Newton. 

"  In  whatever  way  the  restoration  of  the  coin  might  be 
effected,  great  sacrifices  must  be  made,  either  by  the  whole 
community  or  by  a  part  of  the  community.  And  to  call  for 
such  sacrifices  at  a  time  when  the  nation  was  at  war,  and 
was  already  paying  taxes  such  as  ten  years  before  no  financier 
would  have  thought  it  possible  to  raise,  was  undoubtedly  a 
course  full  of  danger.  Timorous  politicians  were  for  delay; 
but  the  deliberate  conviction  of  the  great  Whig  leaders  was 
that  something  must  be  hazarded,  or  that  everything  was 
lost.  Montague,  in  particular,  is  said  to  have  expressed  in 
strong  language  his  determination  to  kill  or  cure  !  If,  in- 
deed, there  had  been  any  hope  that  the  evil  would  merely 
continue  to  be  what  it  was,  it  might  have  been  wise  to  defer 
till  the  return  of  peace  an  experiment  which  must  severely 
try  the  strength  of  the  body  politic.  But  the  evil  was  one 
which  daily  made  progress,  almost  visible  to  the  eye.  There 
might  have  been  a  recoinage  in  1694  with  half  the  risk  which 
must  be  run  in  1696,  and  great  as  would  be  the  risk  in  1696, 
that  risk  would  be  doubled  if  the  recoinage  were  postponed 
till  1698. 

"  Those  politicians  whose  voice  was  for  delay  gave  less 
trouble  than  another  set  of  politicians  who  were  for  a  general 
and  immediate    recoinage,   but  who  insisted   that  the  new 


RESUMPTION  OF  SPECIE  PA  YMENTS,  83 

shilling  should  be  worth  only  ninepence  or  ninepence  half- 
penny.    At  the  head  of  this  party  was  William  Lowndes, 
Secretary  of  the  Treasury,  a  most  respectable  and  industrious 
public  servant,  but  much  more  versed  in  the  details  of  his 
office  than  in  the  higher  parts  of  political  philosophy.     He 
was  not  in  the  least  aware  that  a  piece  of  metal  with  the 
king's  head  on  it  was  a  commodity   of  which  the  price  was 
governed  by  the  same  laws  which  govern  the  price  of  a  piece 
of  metal  fashioned  into  a  spoon  or  a  buckle,  and  that  it  was 
no  more  in  the  power  ot  Parliament  to  make  the  kingdom 
richer  by  calling  a  crown  a  pound  than  to  make  the  kingdom 
larger  by  calling  a  furlong  a  mile.     He  seriously  believed, 
incredible  as  it  may  seem,  that  if  the  ounce  of  silver  were 
divided  into  seven  shillings  instead  of  five,  foreign   nations 
would  sell  us  their  wines  and  their  silks  for  a  smaller  num- 
ber of  ounces.     He  had  a  considerable  following,  composed 
partly  of  dull  men  who  really  believed  what  he  told  them, 
and  partly   of  shrewd  men  who   were    perfectly  willing  to 
be  authorized  by  law  to  pay  a  hundred  pounds  with  eighty. 
Had  his  arguments  prevailed,  the  evils  of  a  vast  confiscation 
would  have  been  added  to  all  the  other  evils  which  afflicted 
the  nation  ;  public  credit,  still  in  its  tender  and  sickly  infancy, 
would  have  been  destroyed,  and  there  would  have  been  much 
risk  of  a  general  mutiny  of  the  fleet  and  army.  Happily  Lown- 
des was  completed  refuted  by  Locke  in  a  paper  drawn  up  for 
the  use  of  Somers.     Somers  was  delighted  with  this  little 
treatise,  and  desired   that  it  might  be  printed.     It  speedily 
became  the  text-book  of  all  the  most  enlightened  politicians 
in   the   kingdom,  and   may  still   be  read  with   pleasure  and 
profit." 

The  proposition  of  Lowndes  was  for  a  recoinage 
of  the  currency  with  one-fifth  less  metal  than  the 
standard  of  the  old  coins ;  "  to  raise,"  to  use  his  own 
words,  "  the  value  of  the   silver  in  the  coins  to  the 


84     RESUMPTION  AND  THE  SILVER  QUESTION. 

foot  of  6s.  ^d.  in  every  crown,  because  the  price 
of  standard  silver  in  bullion  is  risen  to  6s.  ^d.  an 
ounce."  Bullion,  when  purchased  and  paid  for  in 
the  debased  coins,  had  risen  in  ratio  to  their  depre- 
ciation ;  in  other  words,  five  light  coins  were  re- 
quired to  purchase  a  given  weight  of  bullion  which 
could  have  been  purchased  by  four  coins  of  full 
weight.  Locke  was  called  upon  to  prove,  and  did 
prove  most  conclusively,  that  equal  weights  of  sil- 
ver were  equal  in  value  to  equal  weights  of  equal 
fineness  ;  and,  consequently,  that  nothing  could  be 
gained,  at  home  or  abroad,  by  altering  the  stand- 
ard,-as  the  coins,  both  at  home  and  abroad,  would 
pass  only  at  their  value  measured  by  weight  and 
fineness.  It  would  seem  that  the  conclusions  to 
which  Locke  came  might  have  been  assumed  as 
axioms,  from  which  he  might  have  commenced  his 
argument.  In  it  the  whole  question  of  the  nature 
of  metallic  money,  and  the  relation  of  coinage  to 
the  value  of  the  coins,  was  discussed  with  a  force 
and  amplitude  which  left  nothing  for  future  gener- 
ations but  to  repeat  the  demonstrations  which  he 
piled,  with  matchless  profusion,  one  upon  another. 
Nearly  two  hundred  years  have  elapsed  ;  and  when 
precisely  the  same  question  comes  up  in  the  United 
States,  instead  of  recurring  to  the  example  of  Eng- 
land in  a  similar  crisis,  and  the  demonstrations  which 
forever  settled  the  question  of  coinage  in  that  coun- 
try, and  which  was  equally  applicable  to  the  coin- 
age of  every  other.  Congress  proceeds  to  enact  ab- 


RE  S  UMP  TION  OF  SPE  CIE  PA  YMEN  TS.         8  5 

surdities  far  greater  than  those  which  Lowndes 
proposed,  not  only  by  attempting  to  raise  ten  per 
cent,  the  value  of  silver,  by  the  insignia  imposed 
upon  it,  but  in  attempting  to  give  to  the  notes  of 
the  government,  for  the  redemption  of  which  only 
one-third  their  amount  is  to  be  provided,  a  value 
equal  to  their  nominal  amount  in  coin. 

The  plan  for  relief  finally  adopted  provided  that 
the  money  of  the  kingdom  should  be  recoined  ac- 
cording to  the  old  standard  of  weight  and  fineness  ; 
that  all  the  pieces  should  be  "  milled,"  and  that 
the  loss  on  the  clipped  pieces  should  be  borne  by 
the  public.  A  time  was  fixed  after  which  no 
clipped  money  should  pass,  except  in  payments  to 
the  government,  and  a  later  time  after  which  no 
clipped  money  should  be  passed  at  all.  To  make 
up  in  part  the  loss  on  the  clipped  coins,  the  Bank 
of  England  undertook,  on  the  security  of  the 
window-tax,  to  advance  to  the  government  ;^  1,200,- 
000.  This  advance  afforded  only  partial  relief. 
Full  relief  could  only  be  had  when  the  new  currency 
should  come  in  sufficient  abundance  to  fill  up  the' 
vacuum  made  by  calling  in  the  old. 

"  Saturday,  the  2d  of  May,  1696,"  continues  Mr.  Macaulay, 
"  had  been  fixed  as  the  last  day  on  which  the  clipped  crowns, 
half-crowns,  and  shillings  were  to  be  received  by  tale  in  ])ay- 
ment  of  taxes.  The  Exchequer  was  besieged  from  dawn  till 
midnight  by  an  immense  multitude.  It  was  necessary  to  call 
in  the  guards  for  the  purpose  of  keeping  order.  On  the  fol- 
lowing Monday  began  a  cruel  agony  of  a  few  months,  which 


86     RESUMPTION  AND  THE  SILVER  QUESTION. 

was  destined  to  be  succeeded  by  many  years  of  almost  un- 
broken prosperity. 

"  Most  of  the  old  silver  had  vanished.  The  new  silver  had 
scarcely  made  its  appearance.  About  four  millions  sterling  in 
ingots  and  hammered  coin  was  lying  in  the  vaults  of  the  Ex- 
chequer; and  the  milled  money  as  yet  came  forth  very  slowly 
from  the  mint.  Alarmists  predicted  that  the  wealthiest  and 
most  enlightened  kingdom  in  Europe  would  be  reduced  to 
the  state  of  those  barbarous  societies  in  which  a  m.at  is 
bought  with  a  hatchet,  and  a  pair  of  moccasins  with  a  piece 
of  venison.  There  were,  indeed,  some  hammered  pieces 
which  had  escaped  mutilation  ;  and  sixpences  not  clipped 
within  the  innermost  ring  were  still  current.  This  old  money 
and  the  new  money  together  made  up  a  scanty  stock  of  silver, 
which,  with  the  help  of  gold,  was  to  carry  the  nation  through 
the  summer.  The  manufacturers  generally  continued,  though 
with  extreme  difficulty,  to  pay  their  workmen  in  coin.  The 
upper  classes  seem  to  have  lived  to  a  great  extent  on  credit. 
Even  an  opulent  man  seldom  had  the  means  of  discharging 
the  weekly  bills  of  his  baker  and  butcher.  A  promissory 
note,  however,  subscribed  by  such  a  man,  was  readily  taken 
in  the  district  where  his  means  and  character  w^ere  well 
known.  The  notes  of  the  wealthy  money-changers  of  Lom- 
bard Street  circulated  widely.  The  paper  of  the  Bank  of 
England  did  much  service. 

"  The  directors  soon  found  it  impossible  to  procure  silver 
to  meet  every  claim  which  was  made  on  them  in  good  faith. 
They  then  bethought  them  of  a  new  expedient.  They  made 
a  call  of  twenty  per  cent,  on  the  proprietors,  and  thus  raised  a 
sum  which  enabled  them  to  give  every  applicant  fifteen  per 
cent,  in  milled  money  on  what  was  due  to  him.  They  re- 
turned him  his  bank-note,  after  making  a  minute  upon  it  that 
part  had  been  paid.  A  few  notes  thus  marked  are  still  pre- 
served among  the  archives  of  the  bank,  as  memorials  of  that 
terrible  year.    The  paper  of  the  corporation  continued  to  circu- 


RESUMPTION  OF  SPECIE  PA  YMENTS.  8/ 

late  ;  but  the  value  fluctuated  violently  from  clay  to  day,  and 
indeed  from  hour  to  hour  ;  for  the  puplic  mind  was  in  so  excit- 
able a  state  that  the  most  absurd  lie  which  a  stock-jobber  could 
invent  sufficed  to  send  the  price  up  or  down.  At  one  time 
the  discount  was  only  six  per  cent.,  at  another  time  twenty- 
four  per  cent.  A  ten-pound  note,  which  had  been  taken  in 
the  morning  as  worth  more  than  nine  pounds,  was  often 
worth  less  than  eight  pounds  before  night. 

"  Meanwhile,  strenuous  exertions  were  making  to  hasten 
the  recoinage.  Since  the  Restoration,  the  mint  had,  like 
every  other  public  establishment  in  the  kingdom,  been  a  nest 
of  idlers  and  jobbers.  The  important  office  of  warden,  worth 
between  six  and  seven  hundred  a  year,  had  become  a  mere 
sinecure,  and  had  been  iilled  by  a  succession  of  fine  gentle- 
men who  were  well  known  at  the  hazard-table  at  Whitehall, 
but  who  never  condescended  to  come  near  the  Tower.  This 
office  had  just  become  vacant,  and  Montague  had  obtained  it 
for  Newton.  The  ability,  the  industry,  and  the  strict  upright- 
ness of  the  great  philosopher  speedily  produced  a  complete 
revolution  throughout  the  department  which  was  under  his 
direction.  He  devoted  himself  to  his  task  with  an  activity 
which  left  him  no  time  to  spare  for  those  pursuits  in  which  he 
had  surpassed  Archimedes  and  Galileo.  Till  the  great  work 
was  completely  done,  he  resisted  firmly,  and  almost  angrily, 
every  attempt  that  was  mad*  by  men  of  science,  either  here 
or  on  the  Continent,  to  draw  him  away  from  his  official 
duties." 

"  It  may  well  be  doubted,"  says  Macaulay, 
"whether  all  the  mi.sery  which  had  been  inflicted 
on  the  English  nation  in  a  (juarter  of  a  century  by 
bad  kings,  bad  ministers,  bad  parliaments,  and  bad 
judges,  was  equal  U)  the  misery  caused  in  a  single 
year  by  bad  crowns  and  bad  shillings  "  (silver  being 


88     RESUMTTION  AND  THE  SILVER  QUESTION. 

.the  coin  then  in  use).  If  crowns  and  shillings 
amounting  only  to  a  few  millions  sterling,  bad  from 
not  containing  metal  equaling  their  nominal  value, 
but  entirely  good  for  the  whole  amount  of  the 
metal  they  did  contain,  and  which  never  fluctuated 
from  their  true  value,  produced  such  disastrous  re- 
sults, what  would  be  the  necessary  effect  of  a  cur- 
rency of  government  notes  equaling  $350,000,000, 
possessing  no  intrinsic  value  whatever,  and  which 
represented  no  other  constituent  but  the  promise 
of  the  issuer  to  pay  without  interest  at  his  own 
pleasure  ?  This  currency,  like  that  of  England  in 
1696,  is  not  only  below  the  full  standard  of  coin, 
but  is  constantly  fluctuating  in  value  from  the  un- 
certainty as  to  the  time  of  its  payment,  an  infirm- 
ity from  which  the  English  currency  was  wholly 
free.  The  slightest  consideration  will  show  that 
of  all  currencies  one  of  government  notes  is  the 
worst,  for  the  reason  that  there  is  nothing  by  which 
its  value  can  be  tested.  The  value  of  a  debased 
metallic  currency  is  the  val^ae  of  the  bullion  it  con- 
tains. The  value  of  a  depreciated  currency  of 
banks  is  shown  by  their  books.  But  what  books 
will  show  the  value  of  a  currency  of  government 
notes?  What  was  the  value  of  those  of  the  United 
States  sixteen  years  ago  }  What  ten  years  ago  ? 
What  is  it  now?  A  mere  matter  of  opinion,  till 
government  takes  action  ;  its  value  will  then  de- 
pend upon  the  degree  of  such  action.  The  unex- 
ampled depression  and  torpor  which  have  hung  like 


RESUMPTION  OF  SPECIE  PA  YMENTS.  89 

a  pall  over  the  country  for  so  many  years  are  refer- 
able to  causes  the  necessary  effects  of  which  are 
far  more  palpable  than  those  of  the  distress  of 
which  Macaulay  has  drawn  such  a  striking  picture. 
Was  there  ever  an  opportunity  so  well  fitted  as 
then  to  determine  the  nature  of  money ;  whether 
or  not  value  was  a  necessary  attribute  of  it ;  and 
whether  a  value  could  be  given  by  legislation,  by 
coining  it  at  a  rate  greater  than  its  price  in  bullion, 
as  that  afforded  by  England  at  the  period  de- 
scribed ?  Was  not  the  result  there  conclusive  of 
the  whole  question?  If  coins  of  that  country,  not- 
withstanding the  great  demand  for  them,  could  be 
made  to  circulate  only  at  their  bullion  value,  can 
the  notes  of  the  United  States  which,  as  currency, 
are  to  be  abraded  or  clipped  to  the  extent  of  two- 
thirds  of  their  value,  be  made  to  circulate  at  par 
with  coin  ? 

The  great  problem  always  before  society  is  dis- 
tribution— not  production.  The  latter  can  always 
be  speedily  pushed  to  almost  any  extent.  It 
may  be  wholly  independent  of  the  causes  which 
may  defeat  distribution  altogether.  The  rumor 
of  social  or  political  disturbance  will  create  such 
a  distrust  on  the  part  of  merchants  that  they 
will  immediately  suspend  their  operations  till  the 
result  can  be  known.  In  this  country  the  uncer- 
tainties to  which  they  are  subject  from  our  cur- 
rency arc  more  to  be  feared  than  war  itself.     Tiie 


Qo     RESUMPTION  AND  THE  SILVER  QUESTION. 

remedy  is  precisely  the  remedy  adopted  in  Eng- 
land, the  restoration  of  the  currency  to  the  value 
of  its  standard  coin  by  the  provision  of  an  adequate 
constituent.  So  far  from  having  any  disposition  to 
follow  such  example,  our  government  has  turned 
clipper  on  a  colossal  scale,  committing  in  effect 
what  in  England  would  have  sent  the  offender  to 
the  gallows,  by  imposing  upon  the  people  at  the 
par  of  gold,  silver  coins  whose  bullion  value  is  ten 
per  cent,  below  their  denominational  value. 

In  reply  to  the  inquiry  of  Mr.  Ewing,  as  to  the 
purposes  for  which  the  new  silver  coins  would  be 
used,  the  Secretary  replied  that  he  proposed,  first, 
to  exchange  all  the  silver  dollars  demanded  for 
gold  coin.  He  then  proposed  to  use  silver  dollars 
in  the  purchase  of  silver  bullion  for  coinage,  which 
he  says  he  can  do,  using  the  former  at  the  par 
value  of  gold.  For  general  purposes — for  the  ex- 
penses of  government  and  the  payment  of  inter- 
est— he  would  not  for  the  present  pay  out  silver; 
in  other  words,  he  would  not  discriminate  in  favor 
of  any  creditor,  by  paying  silver,  till  the  three  cur- 
rencies, gold,  silver  and  notes,  all  came  to  an 
equality  of  value.  He  will  very  soon  have,  if  he 
has  not  already  had,  an  opportunity  of  putting  his 
methods  to  a  test.  He  may,  for  a  little  time,  get 
from  those  who  have  duties  to  pay  a  higher  price 
for  his  silver  dollars  than  that  due  to  their  bullion 
value ;  but  this  accidental  advantage  will  be  lost 


RESUMPTION  OF  SPECIE  PA  YMENTS.         91 

SO  soon  as  the  government  notes  are  receivable,  as 
he  proposes,  for  customs  revenues.  But,  his  silver 
dollars  once  in  the  Treasury,  how  is  he  going  to  get 
them  out  ?  Who  is  going  to  take  silver  at  a  value 
ten  per  cent,  less  than  that  of  gold  ?  Who  is  going 
to  take  notes  which  are  even  not  demand  liabili- 
ties, and  for  which  only  partial  provision  has  been 
made?  When  the  equality  he  proposes  is  estab- 
lished, then  the  Model  Republic  may  well  plume 
its  wings  for  a  far  loftier  flight  than  that  taken 
by  any  other  nation.  But  if  the  equality  be  at- 
tempted, and  disgraceful  defeat  follow,  then  must 
the  Model  Republic  submit,  as  best  it  may,  to  the 
taunts,  and  jeers  that  other  nations  will  pour  upon 
it  in  no  scant  measure.  Our  chronic  conceit  taken 
out  of  us,  and  the  ground  cleared,  for  the  moment, 
of  those  who  have  led  us  into  disaster  and  disgrace, 
the  Nation  may,  for  the  first  time,  address  itself 
to  the  only  measures  that  can  yield  permanent 
relief,  and  restore  to  it  its  wonted  prosperity. 

Mr.  Ewixg.  In  case  of  a  drain  of  irold  from  the  Treasury, 
what  measure  would  you  resort  to  to  check  it — I  mean  after 
resumption  ? 

Secretary  Sherman.  The  Treasury  ought  to  be  so  strong 
that  the  thing  would  check  itself.  You  can  scarcely  imagine, 
in  the  probabilities  of  business,  that,  with  no  outstanding 
liabilities  that  are  not  covered  by  actual  cash  on  hand  except 
the  $300,000,000  of  legal-tender  notes,  the  drain  u|)()n  the 
government  would  be  so  great  as  to  txhaust  the  reserve  of 
$120,000,000.  That  proposition  is  ail  based,  not  upon  the 
fact  that  $120,000,000  would  pay  $300,000,000 — we  all  know 


Q2     RESUMPTION  AND   THE  SILVER  QUESTION. 

that  is  not  so — but  upon  the  fact  tliat  it  is  impossible  to 
gather  together  United  States  notes  and  to  present  them  in 
such  a  mass  and  in  such  a  continuous  stream,  and  that  the 
very  effort  to  do  so  would  raise  the  value  of  United  States 
notes.  Their  convenience  is  so  great,  and  the  necessity  for 
them  so  apparent,  that  .such  an  effort  would  at  once  bring 
them  up  to  par  in  gold.  I  think  that  a  drain  of  five,  ten,  fif- 
teen, or  twenty  millions  would  at  once  tend  to  bring  up  ihe 
value  of  greenbacks  until  they  were  at  par  in  gold,  and  then 
there  would  be  no  object  at  all  in  drawing  them  out. 

Mr.  Ewing.  After  resumption  the  greenback  must  remain 
at  par  in  gold  as  long  as  the  Treasury  maintains  resumption  "i 

Secretary  Sherman.  Certainly  ;  and  while  they  are  at 
par  in  gold  they  will  not  be  presented  to  any  considerable 
extent. 

Mr.  Ewing.  Of  course,  if  there  vvas  an  established  differ- 
ence of  I  per  cent.,  or  one-half  of  i  per  cent.,  between  gold 
and  greenbacks,  the  Treasury  would  be  broken  pretty  quick  ? 

Secretary  SheRiMan.  Yes,  sir,  or  a  quarter  of  i  per  cent.; 
there  is  no  doubt  about  that. 

Mr.  Ewing.  Therefore,  after  resumption,  greenbacks  must 
necessarily  be  at  par  with  gold  so  long  as  the  Secretary  is 
able  to  maintain  resumption  ?  Nc*v,  I  am  supposing  a  case 
of  a  drain  of  gold  from  the  action  of  foreign  creditors,  or 
from  any  other  cause,  and  want  to  know  what  means  you 
would  resort  to  to  check  it  ? 

Secretary  Sherman.  I  do  not  think  that  it  would  be 
necessary  to  resort  to  any  means  ;  but  if  it  were  necessary  to 
devise  some  means,  I  would  resort  to  such  as  have  been 
adopted  in  other  countries  —  the  temporary  suspension  of 
specie  payment.  That  is  a  question  for  Congress.  The  Brit- 
ish Bank  Act,  which  is  so  often  quoted  as  the  standard, 
makes  no  provision  for  suspension  ;  there  is  no  legal  suspen- 
sion of  payment  in  England,  nor  does  our  law  make  any  pro- 
vision for  it.    If  the  government  should  meet  such  an  adverse 


RESUMPTION  OF  SPECIE  PA  Y ME  NTS. 


93 


state  of  circumstances  as  to  make  suspension  absolutely 
necessary,  the. government  would  necessarily  have  to  take 
the  responsibility  of  it,  leaving  Congress  to  determine  whether 
the  circumstances  justified  it.     That  has  always  been  so. 

The  old  story  in  the  above,  that  when  the  holders 
of  notes  see  that  they  can  be  paid,  they  will  not 
want  to  be  paid,  need  not  be  further  replied  to. 
In  case  of  pressure,  no  steps  to  meet  it  need  be 
taken,  for  the  reason  that  none  could  be  taken. 
When  it  was  seen  that  government  could  no  longer 
go  on,  all  it  would  have  to  do  would  be  to  follow 
the  example  of  other  nations — suspend.  But  the 
Secretary  forgot  that  nations  issuing  currencies  like 
that  of  the  United  States  never  resume.  Resump- 
tion means  payment,  an  alternative  which  they 
cannot  face.  The  longer  the  suspension  is  con- 
tinued, the  more  impoverished  does  a  nation  be- 
come. Russia  is  a  notable  example  for  the  Secre- 
tary. She  is  under  suspension,  which,  like  that  of 
the  United  States,  is  chronic.  Resumption 'with 
either  will  be  an  end  to  its  currency.  The  English 
Government  never  authorizes  the  Bank  of  England 
to  suspend,  only  to  exceed  the  amount  of  notes 
provided  by  law.  It  must  pay  coin  all  the  same, 
notwithstanding. 

A  drain  of  five,  ten,  fifteen  or  twenty  millions 
would,  the  Secretary  tells  us,  at  once  bring  up  the 
greenbacks  to  a  par  with  gold,  and  the  drain  would 
stop.  How  would  five,  ten,  fifteen  or  twenty  mill- 
ions of   coin  be  drawn  by  means  of  notes,  unless 


94     RESUMPTION  AND  THE  SILVER  QUESTION. 

the  notes  were  at  the  par  of  coin  ?  And  why- 
should  the  raising  of  the  notes  to  par  stop  the 
drain  ?  Upon  the  principle  stated  by  the  Secre- 
tary, a  drain  of  fifty  millions  might  advance  the 
notes  to  twenty-five  per  cent,  premium  ;  a  drain  of 
a  hundred  to  fifty  per  cent,  premium  ;  a  drain  of 
two  hundred  might  advance  the  value  of  the  $140,- 
(X)0,000  left  outstanding  so  that  they  would  com- 
mand at  auction  a  greater  sum  than  the  present 
value  of  the  whole. 


Mr.  Hartzell.  What  would  be  the  effect  of  this  resump- 
tion act  upon  the  national  banks  and  their  depositors  ? 

Secretary  Sherman.  I  cannot  see  that  it  will  have  any 
injurious  effect.     Wherein  ? 

Mr.  Hartzell.  I  understand  from  your  statement  here 
last  Monday,  that  the  national  banks  hold  $600,000,000  of 
deposits.  Lack  of  confidence  might  induce  the  depositors 
to  go  to  these  national  banks  and  demand,  on  the  ist  of  Jan- 
uary, or  soon  after  the  resumption  act  takes  effect,  a  large 
amouht  of  gold.  *  *  * 

Secretary  Sherman.  Your  question  is  a  very  proper  one. 
I  can  only  give  you  my  idea.  All  banking  is  based  upon 
the  idea  that  a  larger  amount  of  paper  money  can  be  main- 
tained in  circulation  than  the  money  in  which  it  is  to  be 
redeemed.     Otherwise  there  would  be  no  object  in  bank- 

Incr         *       ^       "^ 

Mr.  Ewing.  What  about  the  $1,500,000,000  of  deposits  in 
other  banks  than  national  banks  ? 

Secretary  Sherman.  They  are  private  individual  debts  ; 
the  government  has  nothing  to  do  with  them. 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


95 


Mr.  Ewixg.  The  government  has  certainly  to  consider 
them  in  the  plan  of  resumption  ?     *     *    * 

Secretary  Sherman.  It  is  all  to  be  considered  ;  but  $io 
will  pay  Jioo  of  deposits  in  the  ordinary  course  of  busi- 
ness. 

Mr.  Hartzell.  Does  the  mere  fact  that  the  government 
will,  on  the  ist  of  January,  be  able  to  redeem  all  its  legal- 
tender  notes,  bring  us  of  itself  to  specie  resumption  ?  Is 
that  what  we  mean  by  specie  resumption  ? 

Secretary  Sherman.  I  mean  by  specie  resumption  not 
the  payment  of  all  these  debts  in  coin,  but  I  mean  the 
equivalency  of  these  United  States  notes  with  coin,  so  that 
the  people  will  take  paper  at  par  with  coin,  and  if  they  want 
the  coin  they  can  get  it.  I  do  not  suppose  that  %\  out  of 
$ioo  of  greenbacks  will  be  presented  for  redemption. 

Resumption  by  the  government  would  not,  says 
the  Secretary,  injuriously  affect  the  national  banks, 
or  their  depositors,  for  the  reason  that  they  would, 
as  now,  use  government  notes.  A  few  of  these 
would  suffice,  for  with  him  "all  banking  is  based 
upon  the  idea  that  a  larger  amount  of  paper  money 
can  be  maintained  in  circulation  than  the  money 
in  which  it  is  to  be  redeemed,"  when  resumption 
takes  place.  "  I  do  not  suppose,"  he  continues, 
"  that  $1  out  of  $  lOO  of  greenbacks  will  be  presented 
for  redemption."  The  preceding  extracts  indicate 
precisely  the  rock  upon  which  the  Secretary  and 
his'  whole  scheme  arc  to  make  a  disastrous  ship- 
wreck. All  paper  money,  if  it  be  convertible,  will 
be  very  speedily  presented  for  payment,  and  must 
be    paid  when    presented.      The    means    provided 


g6     RESUMPTION  AND   THE  SILVER  QUESTION. 

by  the  banks  for  the  payment  of-  that  issued  by 
them  is  not  "money" — coin — but  merchandise; 
"money"  being  simply  held  to  supplement  such 
means.  If  a  bank  conduct  its  business  properly — 
if  it  make  no  bad  debts,  and  discount  only  such 
bills  as  mature  within  periods  of  ninety  days — all 
its  issues  will  be  taken  in  without  the  use  of  a 
dollar  of  the  kind  of  "money"  to  which  the 
Secretary  refers.  If  not  returned  by  means  of 
merchandise,  it  must  be  taken  in  by  the  paying  out 
of  coin.  'As  the  government  is  not  a  discounter 
of  bills,  the  representatives  of  merchandise,  all  its 
issues  must  be  taken  in  by  the  paying  out  of  coin. 
It  is  just  as  impossible  that  a  currency  lacking  pro- 
vision for  its  redemption  should  circulate  at  the 
par  of  coin  as  that  holders  of  dollars  should  will- 
ingly accept  half-dollars  in  exchange.  Well,  there- 
fore, may  the  Secretary  declare  that  his  kind  of 
resumption  is  not  payment,  but  "  an  equivalency," 
"so  that  the  people  can  get  gold  when  they  want 
it."  How  is  this  equivalency  to  be  secured  ?  Cer- 
tainly not  by  a  provision  equaling  only  one-third 
the  amount  of  the  notes  ;  nor  by  an  agreement  to 
receive  them  equally  with  gold  in  the  payment  of 
the  revenues.  Suppose  the  Secretary  were  to  an- 
nounce that  he  would  receive  notes  and  coin  equal- 
ly in  the  payment  of  the  revenues.  Not  a  dollar 
would  be  paid  but  in  the  cheapest  currency.  If 
silver  could  be  had  at  a  price  lO  per  cent,  below 
that  of  gold,  and  9  per  cent,  below  that  of  green- 


RESUMPTION  OF  SPECIE  PA  YMENTS.         g-r 

backs,  this  would  be  wholly  used.  If  notes  fell  to 
a  discount  from  silver,  then  they  would  be  used. 
Not  a  dollar  of  gold  would  ever  come  into  the 
Treasury.  The  Secretary,  so  soon  as  he  had  ex- 
hausted his  present  hoard,  would  not  have  a  dol- 
lar of  it  to  pay  "  to  the  people  when  they  wanted 
it."  His  plan  of  resumption  reminds  one  of  the 
celebrated  proposition  of  Charles  II.  to  the  Royal 
Society :  "  Why,  if  you  put  a  live  fish  into  a  vase 
full  of  water,  will  the  water  not  overflow  ?  "  Many 
and  long  were  the  speculations  and  conferences 
of  the  learned  members  to  solve  this  wonderful 
freak  of  nature,  till  at  last  it  occurred  to  one  of" 
them  to  put  e  live  fish  into  a  full  vase.  The  ques- 
tion was  instantly  answered. 

Mr.  Chittenden.  Will  not  the  mixed  condition  of  the  na- 
tional bank  currency  be  an  element  of  strength  in  facilitating 
resumption  ?  For  example,  if  you  were  to  present  national 
bank  currency  to  a  bank  for  redemption,  you  must  separate 
the  notes.  If  you  take  any  given  amount  of  national  bank 
currency  which  you  find  on  deposit  anywhere,  you  will  be 
surprised  to  find  how  it  represents  banks  from  all  sections  of 
the  country.  I  take  it  that  no  bank  can  be  called  upon  to  re- 
•  deem  any  but  its  own  issue. 

Secretary  Sherman.   That  is  so  ;  it  is  almost  impossible 
to  sort  national  bank  bills. 

Mr.   Chittenden.    Will  that  be   for  you  an  element  of 
strength  or  of  weakness  ? 

Secretary  Sherman.  It  will  be  an  element  of  strength. 
The  difficulty  of  sorting  national   bank  bills  is  very  great. 
When  they  come  to  sort  them   in  the  Treasury  the  bills  have 
to  pass  through  four  or  five  skilled   hands.     First,  they  are 

5 


98     RESUMPTION  AND   THE  SILVER  QUESTION. 

sorted  into  States,  then  into  denominations,  and  then  into 
banks.  If  you  were  to  try  and  make  a  run  on  any  particular 
bank  in  this  country,  as  they  used  to  do  twenty  or  thirty 
years  ago,  it  would  be  impossible  to  do  so  from  the  difficulty 
of  assorting  notes  of  different  banks. 

The  better  way  would  be  to  have  all  the  bank 
notes  of  the  same  type.  In  such  case  no  bank 
would  be  called  upon  to  redeem  its  issues,  for  the 
reason  that  the  notes  for  which  it  was  liable  could 
never  be  certainly  identified.  In  this  way,  all 
would  be  on  a  specie  basis,  without  being  exposed 
to  be  called  upon  for  a  dollar ! 

The  Chairman.  *  *  *  *  *  *  if  they  can  be  also 
received  for  duties  at  the  custom-house,  it  wduld  help  you  in 
resumption. 

Secretary  Sherman.  Yes.  As  soon  as  we  resume,  or 
are  ready  to  resume,  we  ought  to  receive  greenbacks  for  cus- 
toms duties. 

The  Chairman.  And  bring  them  on  a  par  with  gold  also 
by  making  them  exchangeable  for  bonds. 

Secretary  Sherman.  Yes  ;  or  redeem  such  as  are  pre- 
sented in  coin.  > 

The  Chairman.  On  that  theory  of  resumption  you  would 
resume  already,  in  order  to  have  practical  resumption. 

Secretary  Sherman.   Yes  :   that  is  resumption,  and  we ' 
would  not  know  about  it. 

We  most  sincerely  regret  that  the  Secretary 
will  never  know  the  happy  moment  in  which  he 
will  resume,  more  on  account  of  the  country  than 
his  own.  When  resumption  comes,  he,  with  the 
whole   people,  will   know    it    all    too   well.     Such 


RESUMPTIOX  OF  SPECIE  PA  YMENTS.  ^ 

a  devil  as  that  which  now  possesses  the  nation 
is  of  the  kind  "  that  goeth  not  out  but  by  prayer 
and  fasting." 

Mr.  Ewing.  And  you  could  thus  maintain  an  equality  of 
coin  and  paper  upon  your  theory,  which  is,  that  as  soon  as 
paper  and  coin  are  equal,  nothing  will  be  likely  to  occur  to 
disturb  the  equilibrium  ? 

Secretary  Sherman.  There  will  be  more  or  less  fluctua- 
tion, and  we  must  be  prepared  to  meet  those  fluctuations,  so 
that  if  greenbacks  become  superabundant  we  can  get  gold 
for  them  ;  or  if,  on  the  other  hand,  gold  becomes  a  drug, 
as  it  may,  it  will  be  deposited  for  greenbacks. 

Mr.  Ewing.  But  if  greenbacks  become  superabundant, 
and  are  presented  to  the  Treasury  for  redempiion,  you  will 
have  to  pay  them  out  again  "f 

Secretary  Sherman.  Yes,  as  soon  as  the  equivalency  is 
restored. 

Mr.  Ewing.  That  is,  you  will  hold  whatever  greenbacks 
come  in  until  there  is  an  equivalency  ? 

Secretary  Sherman.  Yes  ;  that  is  the  effect  of  it. 

Mr.  Ewing.  The  Bank  of  England,  when  a  drain  sets 
in,  interrupts  the  movement  of  circulation  by  taking  in  its 
notes  and  not  paying  them  out  until  the  drain  is  checked. 
In  that  respect  your  idea  of  maintaining  resumption  is  the 
same. 

Secretary  Sherman.  Yes.  When  the  notes  are  pre- 
sented, the  Secretary  of  the  Treasury  pays  them  in  coin,  sil- 
ver or  gold,  at  his  discretion.     *     *     * 

Mr.  Ewing.   But  he  would  not  pay  them  out 

Secretary  Shkk.MAN.   Unless  tJR-y.were  equivalent  to  coin. 

Mr.  Ewin(;.  And  he  would  judge  of  their  equivalency  by 
the  drain  ujjon  the  Treasury  ? 

Secretary  Sherman.  He  would  never  be  likely  to   pay 


lOO     I'ESUMPTION  AND  THE  SILVER  QUESTION. 

out  these  greenbacks  if  they  were  to  come  back  again  on 
him  for  coin  ;  and  lie  would  not  be  wise  if  he  did  it. 

Mr.  Ewing.  In  that  respect,  he  maintains  resumption  by 
exercising  the  same  power  and  control  over  the  paper  cur- 
rency as  the  Bank  of  England  does. 

Secretary  Sherman.  Yes,  sir.     *    *    * 

Mr.  Ewing.  I  think  I  have  your  idea  pretty  clearly  that 
your  control  in  putting  out  legal  tenders  or  withholding 
them  is  the  lever  by  which  their  convertibility  is  to  be  main- 
tained ? 

Secretary  Sherman.  Yes  ;  and  then  there  is,  too,  the 
fact  that  the  Secretary  is  under  the  constant  eye  of  Congress 
if  he  abuses  his  powers.   *     *     * 

Mr.  Ewing.  If  there  is  a  drain  of  gold  you  would  sell 
bonds  ? 

Secretary  Sherman.  The  Secretary  might  sell  bonds, 
and,  again,  when  greenbacks  were  abundant  in  the  Treas- 
ury, he  might  make  a  call  for  six  per  cent,  bonds,  as  I  have 
done.  So,  the  Secretary  of  the  Treasury,  administering  under 
this  law,  if  he  found  coin  or  greenbacks  accumulating  in  his 
hands,  would  make  a  call  of  six  per  cent,  bonds  and  would 
pay  them  off  and  sell  four  per  cent,  or  four  and  a  half  per 
cent,  bonds — whichev^er  was  the  current  bond  in  the  mar- 
ket— and  thus  make  good  his  money.  That  operation  would 
go  on  without  difficulty.  That  is  the  way,  at  least,  that  I 
would  conduct  it  if  I  were  in  charge. 

In  the  preceding  extracts  both  the  Secretary  apd 
Mr.  Ewing  again  travel  over  with  renewed  empha- 
sis the  ground  already  many  times  traced.  How- 
ever much  they  differed,  both  agreed  in  this — that 
in  case  of  a  drain  of  gold  the  action  of  the  Bank  of 
England,  under  similar  conditions,  was  to  be  the  ex- 
ample for  our  government.     The  movement  of  the 


RESUMPTION  OF  SPECIE  PA  YMENTS.       \q\ 

precious  metals  was  to  be  controlled  by  increasing 
or  decreasing  the  amount  of  government  notes  in 
circulation.  The  inward  flow  of  notes  was  to  be 
checked  by  withholding,  for  a  time,  such  as  were 
returned.  In  such  case  gold  would  soon  become  a 
''drug''  from  its  abundance,  and  its  holders  would 
be  glad  to  return  it  for  a  more  portable  and  con- 
venient kind  of  currency.  There  will  be  some  ab- 
errations, to  be  sure,  as  there  are  in  the  movement 
of  the  heavenly  bodies;  but  a  wise  law  of  equiva- 
lency, which  the  Secretary  so  well  knows  how  to 
apply,  and  which  is  the  sheet-anchor  of  his  system, 
will  make  everything  square  in  the  end.  The  ebb 
and  flow  of  the  monetary  currents  will  be  only  the 
ebb  and  flow  of  the  tide,  which,  instead  of  being 
hurtful,  is  one  of  the  most  beneficent  processes  in 
nature.  Like  the  tides,  the  Secretary's  monetary 
machine,  once  set  agoing,  will  work  with  auto- 
matic regularity,  shaming  the  jeering  and  doubting 
Thomases  who  had  regarded  it  with  mingled  feelings 
of  dread  and  scorn.  But  arc  not  some  limitations 
imposed  upon  the  Secretary  of  the  Treasury  which 
would  somewhat  interfere  with  his  role  of  imitating 
the  Bank  of  England  in  the  management  of  the 
currency?  .The  Bank  is  a  lender  of  money — cur- 
rency— at  whatever  rate  of  interest  it  chooses  to 
establish.  It  does  not.  as  Mr.  Ewing  and  the  Sec- 
retary assume,  seek  to  control  the  movement  of 
specie  by  means  of  a  greater  or  less  amount  of  its 
notes.     The  Bank,  unfortunately  perhaps,  has  no 


I02     RESUMPTION  AND   THE  SILVER  QUESTION. 

discretion  in  the  matter  of  their  issue.  It  must  dis- 
count ^t  periods  of  the  greatest  distrust  and  pres- 
sure upon  it  all  the  paper  that  comes  within  the 
rules  established,  not  in  a  panic,  but  when  every- 
thing was  smooth  and  easy.  It  may  very  plainly  see 
tlj^  consequences  to  which  such  a  course  must 
lead ;  but  by  the  theory  of  its  organization,  the 
public,  not  itself,  are  the  judges  of  the  amount  of 
currency  that  is  needed.  It  was  its  boast  that  dur- 
ing the  crises  of  1 847,  1857  ^"cl  1 866,  it  never  refused 
any  paper  proper  for  discount.  When  a  crisis 
threatens,  it  says  to  the  government,  "  You  created 
the  Bank  to  supply  the  country  with  currency. 
This  will  be  supplied  so  long  as  a  note  remains  in 
its  vaults.  If  it  fails,  the  responsibility  will  rest 
upon  the  law,  not  upon  the  Bank."  The  govern- 
ment fully  acquiesces  in  such  construction,  and  es- 
capes the  effect  by  setting  the  law  aside.  Our  Sec- 
retary, not  being  a  lender  of  money,  and  having  no 
control  by  means  of  rates  of  interest  over  the  ebb 
and  flow  of  specie,  proposes  to  do  what  the  Bank 
never  attempts — to  withhold  his  notes  when  there 
is  a  run  for  gold,  and  pay  them  out  freely  when 
gold  becomes  a  drug.  But  how  is  he  to  enact  the 
role  which  he  assumes  with  such  alacrity?  He  is  a 
public  officer.  All  his  duties  and  functions  are 
prescribed  by  law.  If  he  exceeds  them  in  the 
slightest  degree,  he  becomes  a  criminal  in  the  eye 
of  the  law.  He  cannot  touch  a  dollar  but  upon 
a  proper  voucher.     Those  to  be  paid,  not  himself, 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


103 


determine  the  time  of  payment.  In  his  preten- 
sions to  reguJate  tlie  mighty  currents  that  are  con- 
stantly moving  with  resistless  force  through  com- 
mercial affairs,  he  reminds  one  of  the  philosopher 
in  the  story  of  Rasselas,  upon  whose  watchful  care 
depended  the  orderly  movement  of  all  the  heavenly 
bodies.  The  philosopher  was  harmless  from  his 
impotence.  The  Secretary,  as  impotent  for  good, 
is  yet  as  potent  for  mischief  in  his  sphere  as  would 
have  been  the  philosopher  in  his,  could  he  have 
touched  the  stars.  Suppose  $50,000,000  of  coin 
be  drawn.  How  is  this  to  be  recovered  ?  He  says 
he  will  sell  bonds.  This  will  not  help  him ;  for 
while  he  is  selling  bonds  with  one  hand,  he  is 
buying  bonds  with  the  other.  The  incoming  rev- 
enues meet  the  current  expenses.  He  assumes 
that  the  withdrawal  from  circulation  of  the  fifty 
millions  of  notes  will  make  them  so  scarce  that  the 
people  will  bring  back  the  coin  for  the  sake  of  get- 
ting them.  But  what  would  they  want  the  notes 
for  ?  The  gold,  or  the  greater  part  of  it,  would 
have  been  drawn  to  serve  as  reserves  for  issues  by 
banks,  exceeding  perhaps  five  times  the  amount 
drawn — issues  which  would  form  a  far  better  cur- 
rency than  the  notes  of  the  government,  from  be- 
ing at  all  times  convertible  into  coin. 

The  difference  between  the  Treasury  of  the 
United  States  and  the  Bank  of  I-lngland  is  far 
wider  than  the  difference  in  the  functions  of  the 


104    ^^^1^^-'>^^'^^0.V  A.VD  THE  SILVER  QUESTION. 

two.  The  latter  is  managed  by  twenty-five  direc- 
tors, including  the  governor,  who  are  merchants 
selected  for  their  probity,  intelligence,  and  ability  in 
commercial  and  monetary  affairs ;  and  who,  in  the 
discharge  of  their  duties,  are  administering  upon 
their  own  estates.  A  wide  and  enlightened  experi- 
ence has  taught  them  that  their  gains  are  in  ratio 
as  the  general  welfare  is  advanced.  Never,  through 
the  long  period  of  the  existence  of  the  Bank,  has  a 
charge  been  brought  against  them  of  knowingly 
sacrificing  the  public  welfare  to  their  own.  The 
operations  of  the  Treasury  of  the  United  States, 
instead  of  being  directed  by  twenty-five  merchants 
selected  for  a  reputation  acquired  through  a  long 
and  honorable  career  in  their  various  lines  of  busi- 
ness, are  almost  certain  to  be  committed  to  persons 
without  training  for  the  positions  they  hold,  who 
have  no  direct  personal  interest  in  the  result,  and 
who  are  constantly  liable  to  be  the  sport  of  the  cur- 
rents and  counter-currents  which,  in  a  country  like 
our  own,  are  always  moving  in  some  direction 
with  almost  resistless  force.  All  will  recollect  that, 
a  few  years  ago,  a  Secretary  of  the  Treasury,  in  obe- 
dience to  the  pressure  brought  upon  him,  or  to  an 
assumed  necessity,  re-issued  in  manifest  violation  of 
law,  or  what  was  believed  to  be  law,  a  large  amount 
of  notes  that  had  been  taken  in  for  cancellation. 
The  future  in  this  respect  is  certain  to  repeat  the 
past.  What  a  few  years  ago  was  a  violation  of  the 
law,  deserving  the  severest  reprobation,  has  now  be- 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


105 


come  the  established  policy  of  the  government. 
Are  the  merchants  and  bankers,  are  the  people,  to 
commit  to  the  class  of  men  who  are  likely  to  pre- 
side over  the  Treasury  the  custody  and  direction 
of  affairs  whose  proper  management  requires  the 
maturest  experience  and  the  highest  qualities  of 
character  and  mind  ?  If  so,  the  Model  Republic 
may  without  further  delay  hang  out  the  sign, 
"These  premises  to  let,  the  recent  occupant  having 
given  up  the  business."  But  our  people  are  not 
yet  come  to  such  a  pass  as  this.  So  long  as  there 
is  sense  enough  on  their  part  to  exact  an  equiva- 
lent in  their  transactions,  they  will  never  finally 
rest  till  the  currency  they  use  is  the  equivalent  of 
coin,  no  matter  how  long  and  tortuous  the  path 
through  which  they  may  be  led. 

The  above  summary  of  the  famous  conferences 
between  the  Secretary  of  the  Treasury  and  the 
leading  committees  of  Congress,  shows  his  views  on 
the  subject  of  resumption  and  the  means  necessary 
to  be  provided  therefor.  It  is  not  payment,  says 
the  Secretary,  but  equivalency  between  government 
nptes  and  coin,  so  that  no  one  will  have  any  motive 
to  convert  the  one  into  the  other.  .Such  equiva- 
lency is  to  be  secured  by  a  partial  provision  of  coin 
and  by  enlarging  the  sphere  of  use  of  the  notes. 
With  such  provision,  he  does  not  anticipate  that 
one  note  in  a  hundred  will  ever  be  presented.  It 
must,  however,  be  re-enforced  by  the  retention  of 
5* 


I06    RESUMPTION  AND  THE  SILVER  QUESTION. 

the  legal-tender  clause,  and  by  allowing  him  to  pay 
out  the  notes  to  the  full  extent  of  those  outstand- 
ing at  the  time  resumption  was  a  fait  accompli — 
in  other  words,  to  pay,  or  not  to  pay,  to  suit  his 
own  ideas  of  convenience  or  necessity.  From  the 
Senate  Committee  he  received  nothing  but  com- 
plete acquiescence.  He  was  met  in  a  very  different 
temper  by  that  of  the  House,  which  is  the  great 
nucleus  of  the  enemies  of  resumption.  The  leading 
figure  in  it  is  Mr.  Ewing,  of  Ohio,  an  earnest  advo- 
cate of  the  complete  substitution  of  irredeemable 
government  money  for  that  of  banks.  He  agreed 
with  the  Secretary  that  the  notes,  or  the  greater 
part  of  those  outstanding,  should  remain  out ;  but 
was  wholly  opposed  to  making  any  provision  there- 
for. At  the  same  time  he  contended  that  the  pro- 
posed provision  was  wholly  inadequate  to  its  object. 
The  point  of  controversy  was  narrowed  to  this — 
Mr.  Ewing:  "//"you  have  only  $120,000,000  of 
coin,  how  are  you  going  to  pay  $647,000,000  of 
notes?"  "My  dear  sir^"  replies  the  courteous 
Secretary,  "nothing  is  further  from  our  purpose 
than  paying.  Heaven  forbid  that  we  should  at- 
tempt anything  of  the  kind  !  for  how  can  $120,000,- 
000  pay  $647,000,000,  or  even  $347,000,000?  But 
we  must  make  a  sJioiv  of  paying.  If  we  do,  no  one 
will  want  to  be  paid."  Mr.  Ewing  could  only  ask, 
"What  z/the  holders  of  the  notes  should  want  to 
be  paid?  How  can  you  do  it?"  The  Secretary 
could  only  reply,  "//"  they  do  not  want  to  be  paid. 


RESUMPTION  OF  SPECIE  PA  YMENTS. 


107 


am  I  not  all  right  ?  "  He  could  not  by  any  possi- 
bility explain  why  the  notes  would  not  be  present- 
ed for  payment,  nor  could  Mr.  Ewing  why  they 
would.  The  if,  on  either  side,  was  the  pons  asino- 
riim  which  neither  could  pass;  "and  so  they  meas- 
ured swords,  and  parted."  With  the  single  excep- 
tion of  Mr.  Chittenden's  questions,  with  the  answers 
to  which  he  appeared  fully  content,  neither  con- 
ference elicited  an  expression  which  indicated 
the  least  understanding  of  the  laws  and  nature  of 
money,  or  the  slightest  appreciation  of  the  mighty 
significance  of  the  subject  under  discussion. 

What  is  the  great  problem  now  before  the  coun- 
try? The  restoration  of  its  power  of  natural  ac- 
tion in  the  operations  of  production  and  trade. 
This  is  all.  How  is  such  a  result  to  be  accom- 
plished? By  repealing  all  laws  which  seek  to  give 
to  money  of  any  kind  a  legal  competency  greater 
than  that  due  to  its  intrinsic  or  representative 
value.  If  government  wishes  to  enter  the  field 
upon  such  terms,  let  it  enter  it.  What  its  money 
would  be  without  provision  for  its  enforced  circu- 
lation, the  Secretary  of  the  Treasury  has  already 
told  us:  "If  you  strike  out  this  legal-tender  clause, 
the  government  notes  will  fall  dead  upon  the 
money  markets  of  the  world.  They  will  be  refused 
by  the  banks,  and  will  be  refused  as  a  subordinate 
and  disgraced  currency  that  will  not  pass  from 
hand  to  hand."     If  bank   notes  were   made   legal 


I08     RESUMPTION  AND  THE  SILVER  QUESTION, 

tender,  "  they  would,"  to  repeat  the  Secretary  (in- 
stead of  circulating  as  they  now  do  in  countries 
upon  a  specie  basis  at  the  par  of  coin),  "  fall  dead 
upon  the  money  markets  of  the  world  ;  they  would 
be  a  subordinate  and  disgraced  currency,  and  would 
not  pass  from  hand  to  hand."  Why?  For  the  rea- 
son that  such  provision,  if  it  could  be  availed  of 
by  the  issuer,  might  defeat  payment  altogether. 
Why  should  government  money  possess  an  immu- 
nity not  accorded  to  that  of  banks?  What  is  bank 
money?  Instruments  arising  out  of  production 
and  trade,  which  disappear  with  their  constituent. 
Such  instruments  are  similar  in  kind  to  thousands 
whereby  cumbrous  or  expensive  processes  are 
avoided  or  abridged,  the  welfare  of  society  being 
advanced  in  like  ratio.  What  is  government 
money?  Debt  payable  at  its  pleasure.  It  never 
disappears,  for  the  reason  that  no  constituent  can 
be  reached  by  its  use.  The  two  kinds  are  as  unlike 
as  capital  is  to  debt — as  something  is  to  nothing. 
Why  persist  in  the  attempt  to  make  nothing  per- 
form the  function  of  something?  The  problem  is 
one  that  defies  solution.  It  has  been  tried  a  thou- 
sand times  with  precisely  the  same  result — inflation 
so  long  as  the  issues  continue,  with  an  extravagant 
expenditure  of  all  kinds  in  ratio  to  the  amount,  to 
be  followed  by  an  exhaustion  in  proportion  to  the 
delirium — all,  perhaps,  to  have  the  fate  of  the  Con- 
tinental money  of  the  United  States  and  the  As- 
signats  of  France,  which  in  their  fall  involved  the 


RESUMPTION  OF  SPECIE  PA  YMENTS,        109 

material  and  moral  welfare  of  the  two  nations  in 
a  common  ruin. 

It  may  be  proper  to  advert  briefly,  in  this  con- 
nection, to  an  alleged  saving  by  the  use  of  notes 
equal  to  the  interest  on  the  amount  outstanding. 
The  saving  proceeds  upon  the  assumption  that 
government  can  borrow  without  paying  interest.  It 
can  no  more  do  this  than  can  an  individual.  Inter- 
est does  not  arise  out  of  considerations  due  to  either 
lender  or  borrower,  but  solely  out  of  those  due  to 
the  thing  itself.  Bills  discounted  at  bank  do  not 
usually  bear  interest  on  their  face.  It  is  none  the 
less  paid.  Government  notes  do  not  bear  interest ; 
but  the  m'oment  they  are  issued,  they  fall  to  a  dis- 
count which  is  assumed  to  equal  the  interest  on 
their  amount  till  they  are  paid.  In  less  than  six 
months  after  the  first  issue  of  legal-tender  notes  of 
the  United  States  were  made,  gold  rose  to  a  pre- 
mium of  371  per  cent.  This  premium  was  but  an- 
other word  for  interest  on  their  amount  until,  in 
public  opinion,  they  would  be  paid.  At  one  time 
the  premium  rose  to  185  percent.  The  average 
premium  for  1863,  1864,  and  1865  equaled  fully  60 
per  cent.  Within  such  periods  the  debts  incurred 
by  the  government  and  States  on  account  of  the  war 
equaled  $3,000,000,000.  The  excess  of  expendi- 
ture, or  liability  incurred  due  directly  to  use  of  the 
government  money  bearing  no  interest,  equaled  fully 
$2,000,000,000,  the  annual  interest  on  which  at  5 
per  cent,  equals  $100,000,000  annually.     Part  of  this 


I  10    RESUMPTION  AND  THE  SILVER  QUESTION. 

vast  sum,  it  is  true,  has  been  paid  ;  but  more  than 
half  of  it  remains  unpaid,  and  calling  for  interest 
equaling  $50,000,000  annually.  So  much  for  the 
saving  assumed  to  be  effected  by  the  use  of  a 
few  hundred  millions  of  non-interest-bearing  debt. 
The  attempt  to  avoid  the  payment  of  interest,  either 
by  government  or  individuals,  is  certain  to  increase 
many  times  the  amount  of  penalty  to  be  paid.  To 
this  direct  penalty  follows  another  still  more  dis- 
astrous. The  inflation  which  government  money 
always  causes  is  always  followed  by  a  correspond- 
ing depression,  which  necessarily  continues  till  the 
cause  is  removed.  In  the  case  of  the  United 
States,  the  period  of  inflation  has  long  since  passed. 
We  are  now  suffering  an  annual  loss  equaling  prob- 
ably the  whole  amount  of  greenbacks  in  circula- 
tion. The  nation  is  held  in  chains  which  she  has 
neither  the  sense  to  see  nor  the  courage  to  throw 
off.  She  will  soon  be  driven  to  take  action. 
Whether  this  shall  be  heroic  and  honorable — the 
payment  in  some  way  of  the  debt  which  is  now 
producing  such  consequences — or  outright  repu- 
diation, is  soon  to  be  seen.  The  alternative  can- 
not, nor  will  it,  be  long  delayed. 


-      PART  III. 
THE     SILVER    QUESTION. 


Upon  the  formation  of  the  government,  one  of  the 
earliest  and  most  important  measures  engaging  the 
attention  of  Mr.  Hamilton,  first  Secretary  of  the 
Treasury  of  the  United  States,  was  the  establish- 
ment of  a  mint,  "  to  correct " — to  quote  from  his 
celebrated  Report  of  1791 — "the  immense  disorder 
which  already  reigns  in  so  delicate  and  important 
a  concern  [as  the  currency],  and  the  still  greater 
disorder  which  every  moment  is  possible."  The 
money  in  circulation,  at  the  time,  were  coins  from 
nearly  every  mint  in  the  world  ;  the  greater  part, 
however,  being  those  of  Spain  and  her  colonies, 
at  that  time  the  chief  source  of  the  supply  of  the 
precious  metals.  A  portion  of  the  coins  in  circula- 
tion of  different  nationalities  were,  for  a  time,  from 
the  necessity  of  the  case,  made  legal  tender  and 
receivable  in  the  payment  of  the  revenues.  The 
greater  part  of  the  coins  were  largely  reduced  in 
value  from  wear,  while  the  amount  of  pure  metal 
they  contained  depended  upon  the  regulation  of 
each  mint.  In  the  establishment  of  a  systena  for 
the  new  nation,  the  first  thing  to  be  considered  was 

I II 


112     RESUMPTION  AND  THE  SILVER  QUESTION. 

the  relative  value  of  the  two  metals  to  be  used — 
gold  and  silver — so  that,  with  the  two,  there  should 
be  but  one  standard ;  the  coins  of  each  metal  of 
similar  denominations,  or  their  fnultiples,  to  have 
equal  values.  In  determining  this  point,  it  became 
necessary  to  decide  upon  the  metal  best  fitted  to 
serve  as  the  unit  to  which  the  value  of  the  other 
should  be  referred.  Mr.  Hamilton,  with  a  sagacity 
w^iich  never  failcfd  him,  at  once  adopted  gold  as 
having  the  most  uniform  value.  "  That  species  of" 
(silver)  "coin,  the  old  piaster"  (dollar)  "of  Spain" 
— to  quote  further  from  his  report  of  1791 — "has 
never  had  any  settled  or  standard  value  according 
to  weight  or  fineness,  but  has  been  permitted  to  cir- 
culate by  tale,  without  regard  to  either,  very  much 
as  a  money  of  convenience,  while  gold  has  had  a 
fixed  price  by  weight,  with  an  eye  to  its  fineness. 
This  greater  stability  of  the  value  of  the  gold  coins 
is  an  argument  of  force  for  regarding  the  money 
unit  as  having  been  hitherto  virtually  attached  to 
gold  rather  than  to  silver.  Twenty-four  and  sixth- 
eighths  grains  of  fine  gold  have  corresponded  with 
the  nominal  value  of  the  dollar  in  the  several  States, 
without  regard  to  the  successive  diminutions  of 
its "  (the  dollar)  "  intrinsic  worth.  *  *  *  The 
nominal  value  of  the  dollar  in  each  State  corre- 
sponds also  with  24.75  grains  of  fine  gold,  and  with 
something  between  368  and  374  grains  of  fine  sil- 
ver. *  *  *  As  long  as  gold,  either  from  its 
intrinsic   superiority  as   a   metal,  from  its  greater 


THE  SILVER  QUESTION. 


113 


rarity,  or  from  the  prejudices  of  mankind,  retains 
so  considerable  a  preeminence  in  value  over  silver 
as  it  has  hitherto  had,  a  natural  consequence  of 
this  seems  to  be  that  its  condition  will  be  more 
stationary.  The  revolutions,  therefore,  which  may 
take  place  in  the  relative  value  of  gold  and  silver 
will  be  changes  in  the  state  of  the  latter  rather 
than  of  the  former."  Much  more  might  be  quoted 
to  the  same  effect.  Enough  has  been  given  to 
show  that  Hamilton  grasped  the  whole  subject. 
Whatever  has  followed  in  this  country  up  to  1853 
has  been  to  confirm,  what  he  sought  to  establish,  a 
relation  of  the  two  metals  according  to  their  value, 
referring  that  of  silver  to  that  of  gold  as  the  more 
uniform,  and  consequently  the  proper  unit  and 
standard.  After  full  investigation  and  deliberation, 
Hamilton  adopted  the  ratio  of  i  to  15;  the  gold 
dollar,  or  unit,  to  consist  of  24.75  grains,  and  the 
silver  dollar  371.25  grains  of  pure  metal. 

The  result  speedily  showed  gold  to  have  been 
undervalued  in  the  coinage.  Having  a  legal  com- 
petency less  than  its  bullion  or  market  value,  it 
was  exported  as  fast  as  coined,  leaving  the  country 
with  but  one  metallic  money — silver.  To  remedy 
this  mistake  various  propositions  were  from  time  to 
time  submitted,  the  object  being  to  retain  gold  in 
the  countiy  by  equalizing  its  value  with  silver. 
"Gold  " — to  copy  from  a  report  made  in  18 19  by  a 
committee  of  the  House  of  Representatives — "  can 
hardly  be  considered  to  form  a  material  part  of  our 


114    ^^SUMFTION  AND  THE  SILVER  QUESTION. 

money  circulation  for  the  past  twenty-six  years  ;  " 
that  is,  from  the  establishment  of  the  Mint.  Mr. 
Crawford,  Secretary  of  the  Treasury  in  1820,  re- 
commended that  the  ratio  between  gold  and  silver 
be  established  at  i  of  the  former  to  15.75  of  the 
latter.  .  Nothing  came,  however,  of  his  proposition 
and  many  others  of  the  same  kind,  till  1834,  when 
the  relative  value  of  the  two  metals  was  established 
by  law  at  i  of  gold  to  16  of  silver,  the  pure  metal 
in  the  gold  dollar  being  reduced  from  24.75  to  23.2 
grains  to  the  dollar.  A  slight  addition  of  value 
was  made  in  1837,  by  raising  the  amount  of  pure 
metal  in  the  gold  coins  from  899.225  to  900.000 
fine.  The  avowed  object  of  the  advocates  of  a 
change  in  the  relative  coined  value  of  the  two 
metals  was  to  bring  gold  into  active  circulation, 
and  they  determined  to  establish  a  rate  that  would 
effectually  accomplish  their  purpose.  Such  was 
their  strength  that  they  carried  their  measure  in 
the  Senate  by  a  vote  of  four  to  one,  and  in  the 
House  by  a  vote  of  five  to  one. 

As  the  ratio  established  by  Mr.  Hamilton  over- 
valued silver,  in  consequence  of  which  gold  was 
driven  from  the  country,  the  act  of  1834  under- 
valued silver  to  the  extent  of  about  one  and  a  half 
per  cent.,  in  consequence  of  which  its  coins  were 
driven  from  the  country,  leaving  in  circulation  only 
gold  and  debased  foreign  silver  coins.  To  correct 
this  mistake,  Mr.  Corwin,  in   1852,  then  Secretary 


THE  SILVER  QUESTIO.Y.  115 

of  the  Treasury,  called  the  attention  of  Congress  to 
the  consequences  that  had  resulted.  "  So  soon," 
he  said,  "  as  the  state  of  our  foreign  commerce,  as 
is  now  the  case,  requires  the  exportation  of  specie, 
it  is  obvious  that  our  silver  coin  must  be  exported 
while  it  can  be  procured  till  the  demand  for  expor- 
tation is  supplied.  *  *  *  There  seems  to  be 
but  one  immediate  and  direct  remedy  for  this  evil, 
and  that  is  the  one  that  has  already  been  adopted 
in  Great  Britain,  of  changing  the  relative  value  be- 
tween gold  and  silver  coin  by  reducing  the  intrinsic 
value  of  the  latter.  *  *  '"  This  could  be  advantage- 
ously done  by  making  the  (silver)  dollar  weigh  384 
grains  (in  place  of  412}^),  and  the  smaller  coins  in 
proportion.  *  *  *  If  such  a  scale  of  weights 
were  adopted,  the  relation  of  silver  in  such  pieces 
to  gold  would  be  as  14.884  to  i  ;  and  if  the  present 
true  relation  of  bullion  value  is  about  15.675  to  i, 
the  new  proposed  silver  coin  would  be  overvalued 
by  about  five  per  cent.  *  *  *  If  this  plan  is 
adopted  by  Congress,  it,  of  course,  zvill  involve  the 
necessity  of  viaking  silver  coin  a  legal  tender  only 
for  debts  of  small  amount,  not  say,  exceeding  ten 
dollars,  which  is  about  the  same  limit  {forty  shil- 
lin^Qs)  which  has  been  established  in  England.'' 

Pursuant  to  the  recommendations  of  Mr.  Convin, 
Congress,  in  1853,  passed  a  law  reducing  the  weight 
of  silver,  in  coins  of  less  denomination  than  one 
dollar,  from  the  standard  of  412.25  to  384  grains  to 
the  dollar,  the  half-dollar  to  weigh  192  grains,  and 


Il6    RESUMPTION  AND  THE  SILVER  QUESTION.  ' 

the  smaller  coins  in  proportion  ;  the  coins  of  less 
than  one  dollar  not  to  be  legal  tender  in  payments 
exceeding  five  dollars  at  any  one  time.  No  change 
was  made,  at  the  time,  in  the  amount  of  metal  in  the 
silver  dollar,  for  the  reason,  to  use  the  words  of  Mr. 
Hunter,  of  Virginia,  who  reported  the  bill  estab- 
lishing the  subsidiary  coinage,  that  "  the  great  meas- 
ure of  adjusting  the  legal-tender  ratio  between  gold 
aifd  silver  (as  legal  tender  in  unlimited  amounts) 
cannot  be  safely  attempted  until  some  permanent 
relation  between  the  market  value  of  the  two  met- 
als shall  be  established."  At  that  time  the  silver 
dollar,  or  rather  the  amount  of  metal  in  it,  was  at  a 
premium  in  gold  of  4.26  per  cent.,  the  premium  hav- 
ing risen  1.69  per  cent,  from  the  previous  year.  Its 
price  fluctuated  rapidly,  partly  in  consequence  of 
the  discoveries  of  gold  in  California  and  Australia. 
It  was  thought  best,  consequently,  to  await  the 
permanent  effect  of  these  discoveries,  before  at- 
tempting to  establish  a  relation  that  might  have 
to  be  altered  almost  as  soon  as  made.  Congress 
could  well  postpone  any  action  in  reference  to  the 
relative  value  of  the  gold  and  silver  dollar,  for  the 
reason  that  the  latter,  at  the  time,  formed  no  part 
of  the  currency  of  the  country,  it  having  been  taken 
up  for  export  as  "bullion  as  fast  as  it  came  from 
the  mint.  The  effect  of  the  act  of  1853,  conse- 
quently, was  to  place  the  country  effectually  upon  a 
mono-metallic  basis — as  much  so  as  if  the  silver  dol- 
lar itself  had  been  reduced  to  the  position  of  a  sub- 


THE  SILVER  QUESTION.  wj 

sidiary  coin,  the  only  currency  from  our  own  mint 
in  circulation  being  gold  and  the  subsidiary  silver 
coins  of  denominations  of  less  than  one  dollar.  That 
such  was  the  intention  of  the  act  was  fully  shown 
by  Mr.  Dunham,  of  Indiana,  Chairman  of  the  Com- 
mittee of  Ways  and  Means  of  the  House,  which  re- 
ported the  bill.  In  the  course  of  his  remarks  in  its 
support,  he  said : 

"  Another  objection  urged  against  this  proposed  change  \i.e., 
the  reduction  of  tlie  weight  of  the  minor  coins]  "  is,  that  it 
gives  us  a  standard  of  currency  of  gold  only.  What  advan- 
tage is  to  be  obtained  by  a  standard  of  the  two  metals,  which 
is  not  as  well,  if  not  much  better,  attained  by  a  single  stand- 
ard, I  am  unable  to  perceive.  *  *  *  Wherever  the  exper- 
iment of  a  standard  of  a  single  metal  has  been  tried,  it  has 
proved  eminently  successful.  Indeed,  it  is  utterly  impossible 
that  you  should  long  at  a  time  maintain  a  double  stand- 
ard. *  *  *  Gentlemen  talk  about  a  double  standard  of  gold 
and  silver  as  a  thing  that  exists,  and  that  we  proposed  to 
change.  We  have  had  but  a  single  standard  for  the  last  three 
or  four  yP'irs.  That  has  been,  an(j  now  is,  gold.  We  pro- 
pose to  let  it  remain  so,  and  to  adapt  silver  to  it,  to  regulate 
it  by  it."  * 

♦  The  silver  dollar  not  only  formed  no  part  of  the  circulation 
from  1834,  but  it  never,  at  any  time,  formed  any  considerable  por- 
tion of  it.  Up  to  1834  the  whole  number  of  silver  dollars  coined 
equaled  only  $1,439,517,  the  amount  averaging  only  $45,000 
yearly.  From  the  formation  of  the  mint  down  to  1873  the  total  coin- 
age of  silver  dollars  cr|nalcd  only  $8,045,838,  agiinst  $816,905,879 
of  gold,  and  $144,141,885  of  smaller  and  subsidiary  silver  coins. 
From  1S34  to  1873  the  premium  on  silver  dollars  equaled,  on  an 
average,  2.25  ;  the  premium  being  the  highcbt  in  1859,  when  it  rose 


Il8     RESUMPTION  AND   THE  SILVER  QUESTION. 

From  1853  the  laws  relating  to  the  coinage  re- 
mained unchanged  till  1873.  In  1870  a  commu- 
nication, under  date  of  April  25th,  was  addressed 
by  the  Hon.  Mr.  Boutwell,  then  Secretary  of  the 
Treasury,  to  the  Hon.  Mr.  Sherman,  the  Chair- 
man of  the  Committee  on  Finance  of  the  Senate, 
inclosing  a  bill  for  the  thorough  revision  of  all  the 
laws  relating  to  the  mint.  Accompanying  the  bill 
was  a  report,  prepared  by  Mr.  J.  J.  Knox,  then 
Deputy  Comptroller  of  the  Currency,  presenting  the 
reasons  for  the  various  provisions  in  the  bill,  one  of 
which  was  the  discontinuance  of  the  silver  dollar 
as  one  of  the  coins,  for  the  reason  that,  in  conse- 
quence of  its  excess  of  bullion  over  its  nominal 
value,  it  had  long  ceased  to  be  one  of  the  coins  in 
circulation  in  the  country.  On  the  28th  of  April, 
the  bill  was  referred  to  the  Senate  Committee  on 
Finance,  and  a  large  number  of  copies  ordered  to  be 
printed,  with  wide  margins,  and  distributed  among 
experts  and  persons  whose  opinions  were  regarded 
of  value,  in  order  to  elicit  the  widest  comment  and 
criticism.  Numerous  replies  were  received,  the 
purport  of  all  being  embraced  in  that  of  Dr.  Lin- 
derman,  Director  of  the  Mint.  *  *  ^'  "  It  would  be 
better,  in  my  opinion,"  said  Dr.  Linderman,  "  to 
discontinue  the  issue  of  the  silver  dollar  altogether 
[than  to  issue  it  at  a  reduced  value,  as  a  subsidiary 

to  5.22,  and  the  lowest  in  1843,  when  it  fell  to  0.34.  In  1870,  when 
the  bill  demonetizing  silver  was  introduced,  the  premium  stood  at 
2.67,  and  continued  at  about  such  rate  till  the  bill  passed. 


THE  SILVER  QUESTION. 


119 


coin].  The  gold  dollar  is  really  the  legal  unit  and 
measure  of  value.  Having  a  higher  value  as  bullion 
than  its  nominal  value,  the  silver  dollar  long  ago 
ceased  to  be  a  coin  of  circulation,  and  being  of  no 
practical  use  whatever,  its  use  should  be  discon- 
tinued." 

On  the  19th  of  December,  1870,  the  bill  reported 
by  the  Senate  Committee  was  taken  up  for  dis- 
cussion, and  on  the  9th  of  January,  1871,  was 
passed  by  the  Senate  substantially  as  originally  re- 
ported. On  the  13th  day  of  January,  1871,  the  bill, 
having  gone  to  the  House,  was  ordered  to  be 
printed.  On  the  19th  of  February  following,  Mr. 
William  D.  Kelley,  Chairman  of  the  Committee  on 
Coinage  of  the  House,  reported  the  bill  to  that 
body,  w^ith  an  amendment  in  the  nature  of  a  sub- 
stitute, which  agreed  with  the  Senate  bill  in  dis- 
continuing the  coinage  of  the  silver  dollar.  M"r. 
Kellcy's  bill  was  ordered  to  b^  printed  and  recom- 
mitted. On  the  9th  of  March,  1871,  Mr.  Kelley 
again  introduced  the  bill,  which  again  was  ordered 
to  be  printed,  and  again  was  referred  to  his  com- 
mittee. On  the  9th  of  January,  1872,  the  bill  was 
again  reported,  with  a  recommendation  that  it  pass. 
On  the  9th  of  April,  1872,  it  was  taken  up  and  dis- 
cussed at  great  length.  It  was  af^ain  taTcen  up  for 
discussion  on  tJie  27th  of  May,  1872,  when  an 
amendment  was  offered  by  Mr.  Hooper,  a  member 
of  the  Coinage  Committee,  from  Massachusetts,  and 
adopted,  that  the  silver  dollar  be  retained  as  a  sub- 


120    RESUMPTION  AND  THE  SILVER  QUESTION. 

sidiary  currency,  its  value  being  reduced  to  384 
grains,  the  ratio  of  metal  in  the  subsidiary  coins, 
for  the  reasons,  as  stated  by  him  in  the  debate, 
that  '^  the  silver  dollar  oi  412]^  grains,  by  reason  of 
its  bullion  or  intrinsic  value  being  greater  than  its 
nominal  value,  long  since  ceased  to  be  a  coin  of 
circulation,  and  is  melted  by  manufacturers  of 
silverware."  Mr.  Kelley,  in  the  same  debate,  said  : 
*'  It  is  impossible  to  retain  the  double  standard. 
The  value  of  gold  and  silver  continually  fluctuates. 
You  cannot  determine  this  year  what  will  be  the 
relative  values  of  gold  and  silver  next  year.  They 
wer€  15  to  I  a  short  time  ago;  they  are  16  to  i 
now.  *  *  *  I  again  call  the  attention  of  the  House 
to  the  fact  that  gentlemen  who  oppose  this  bill  in- 
sist upon  maintaining  the  silver  dollar,  worth  three 
and  a  half  cents  more  than  the  gold  dollar,  and 
worth  seven  cents  more  than  two  half-dollars.  So 
long  as  these  provisions  remain,  you  cannot  keep 
silver  in  the  country." 

The  bill,  as  amended,  passed  the  House  on  the 
27th  of  May,  1872.  It  was  returned  to  the  Sen- 
ate with  the  amendments,  again  printed,  and  re- 
ferred to  the  Committee  on  Finance,  reported  back 
on  the  i6th  of  December,  1872.  After  debate  it 
was  again  "referred  to  the  committee,  and  pr'inted 
with  the  amendments.  On  the  7th  of  January, 
1873,  it  was  taken  up  for  debate  in  the  Senate,  and 
finally  passed  by  that  body  on  the  17th  of  that 
month,  the  House  amendment  to  the  bill  retaining 


THE  SILVER  QUESTIOy.  121 

the  silver  dollar  as  a  subsidiaiy  coin  having  been 
stricken  out.  As  the  House  adhered  to  its  amend- 
ment, the  bill  went  to  a  committee  of  conference, 
by  which  the  House  amendment  was  stricken  out, 
the  bill  making  no  provision  for  the  coinage  of  the 
silver  dollar  in  any  form.  The  report  of  the  con- 
ference committee  was  accepted  by  both  Houses, 
and  on  the  12th  of  February  the  famous  bill  of 
1873,  by  the  signature  of  the  President,  became 
a  law. 

It  will  thus  be  seen  that  nearly  three  years 
elapsed  from  the  introduction  of  the  proposition 
demonetizing  silver  till  its  final  passage.  During 
this  whole  period  every  possible  means  were  re- 
sorted to  to  give  it  publicity,  and  to  invite  what- 
ever opinion  or  criticism  could  aid  in  coming  to  a 
wise  and  temperate  conclusion.  It  was  during 
this  whole  time  constantly  and  emphatically  urged 
by  the  Secretary  of  the  Treasury.  The  bill  was 
repeatedly  considered  at  length  by  the  Finance 
Committee  of  the  Senate  and  the  Coinage  Commit- 
tee of  the  House,  during  five  different  sessions  of 
Congress.  It  was  repeatedly  read  in  full  in  both 
Houses.  It  was  printed  in  full,  with  the  amend- 
ments, by  order  of  Congress,  eleven  different  times, 
and  twice,  in  addition,  in  the  reports  made  by  the 
Deputy  Controller  of  the  Currency.  The  debates 
upon  the  bill  in  the  Senate  occupy  sixty-six  col- 
umns of  the  Congressional  Globe,  and  those  in  the 
House  seventy-eight  columns.  During  the  period 
6 


122     RESUMPTION  AND   THE  SILVER  QUESTION. 

every  shade  of  opinion,  both  in  and  out  of  Con- 
gress, was  invoked  and  challenged.  Never  was  a 
measure  more  fully,  intelligently,  conscientiously, 
and  exhaustively  considered.* 

We  have  given  a  brief  sketch  of  the  coinage  laws 
from  the  formation  of  the  government,  in  order  to 
show  that,  as  far  as  the  two  metals  are  concerned, 
all  measures  had  one  object — an  equality  of  value 
between  the  two  ;  that  the  act  of  1853,  which  pro- 
vided the  conditions  by  which  alone  the  coins  of 
silver  to  be  issued  in  the  future  could  be  retained 
in  the  country,  not  the  act  of  1873,  was  the  one 
that  placed  the  nation  on  a  mono-metallic  basis 
of  gold;  that  the  act  of  1873  produced  no  change 
in  the  financial  condition  of  the  country.  That  this 
was  not  devised  by  the  rich  as  a  cunning  and  cruel 
method  of  oppressing  the  poor  by  increasing  the 
amounts  to  be  paid  by  them,  is  suf^ciently  shown 
by  the  fact  that  it  substituted  the  lov/er  standard  in 
place  of  the  higher.  The  measure,  consequently, 
if  it  had  any  'design  of  the  kind,  was  conceived 
wholly  in  the  interest  of  the  poor  against  the  rich. 
It  had  no  other  design  than  to  adapt  the  currency 
to  the  convenience  and  wants  of  the  country,  the 
dropping  out  of  the  silver  dollar  being  one  of  the 
least  important  of  the  measures  to  be  accomplished. 

*For  a  series  of  exhaustive  and  valuable  articles  upon  the  coin- 
age of  the  United  States,  by  Edward  Stanwood,  of  the  Boston 
Advertiser,  see  Banker's  Magazine  for  April,  May,  and  June,  1878. 


THE  SILVER  QUESTION.  123 

In  all  the  discussions  in  Congress,  and  in  all  the 
public  documents  having  reference  to  the  subject 
of  coinage,  from  1791  to  1S53,  the  great  theme  was 
equalization  of  the  values  of  gold  and  silver,  so 
that  with  two  metals  there  should,  on  account  of 
their  value,  be  no  choice  in  the  matter  of  stand- 
ard. All  attempts  to  secure  such  a  result,  however, 
signally  failed.  From  1792  to  1834  the  nation 
was  upon  one  basis — silver;  from  1834  to  1853  it 
was  upon  one  basis — gold.  By  the  act  of  the  lat- 
ter year,  the  first  attempt  was  made  to  strike  at 
the  root  of  the  evil  by  subordinating  silver  to 
gold,  by  reducing  the  value  of  the  former  nearly 
seven  per  cent.,  and  by  restricting  the  legal  compe- 
tency of  coins  in  circulation  to  payments  not  ex- 
ceeding five  dollars  at  any  one  time.  The  act  of 
1873  produced  no  change  but  to  drop  an  obsolete 
provision  from  the  statute-book.  If  the  former 
proceeded  from  an  upright  purpose  and  was  benefi- 
cent in  its  results,  then  the  same  may  be  emphat- 
ically asserted  of  the  latter.  If  complaint  was  ever 
to  be  made,  it  should  have  been  made  of  the  act  of 
1834,  which  effectually  demonetized  silver,  at  the 
same  time  it  left  the  country  with  nominally  two 
standards.  But  that  act  has  always  been  regarded 
as  highly  advantageous,  for  the  reason  that  it  led 
to  the  ultimate  adoption  of  the  gold  standard, 
leaving  it  to  the  future  to  provide  a  subsidiary  one 
of  silver  when  the  necessity  therefor  should  be 
seriously  felt.     When  the  act  of  1853  was  passed  a 


124    ^^SUMPTION  AND  THE  SILVER  QUESTION. 

large  number  of  gold  dollars  were  in  circulation,  a 
form  of  currency  far  more  convenient  than  silver 
dollars  ;  so  that  if  there  had  been  any  necessity  of 
coins  of  such  denomination,  this  was  already  fully 
met.  When  the  act  of  1873  passed,  not  the  slight- 
est necessity  was  felt  for  dollars  .of  either  metal, 
from  the  abundance  of  paper  money  of  a  similar 
denomination,  a  far  more  convenient  kind  of  cur- 
rency than  a  metallic  one.  Not  the  slightest  need 
has  ever  been  felt  for  the  silver  dollar,  nor  would  its 
restoration  ever  have  suggested  itself  to  a  single 
person  in  the  country,  had  the  relative  value  of  the 
two  metals  been  maintained.  The  suggestion  of  the 
great  wrong  done  in  demonetizing  it  only  came 
when  it  was  seen  that  its  value  had  fallen  some  ten 
per  cent.  It  was  then  believed  that  by  remonetiz- 
ing  it  debts  of  all  kinds  could  be  scaled  down  in 
equal  ratio.  Hence  the  hypocritical  howl  of  indig- 
nation, and  the  charge  that  the  act  of  1873  was  the 
result  of  a  conspiracy  of  the  rich  against  the  poor, 
to  deprive  the  latter  of  their  proper  currency,  as 
a  means  of  increasing  their  burdens ;  and,  by  the 
same  means,  the  gains  of  the  former.  Never  was 
there  a  more  gratuitous  and  false  assumption. 
To  cover  its  iniquity  and  to  secure  the  desired  re- 
sult, every  possible  effort  is  now  made  to  create  a 
war  of  classes,  to  array  labor  against  capital,  the 
employed  against  the  employer — efforts  which  now 
threaten    the  most  disastrous  results.* 

*  The  act  of  Febuary  21st,  l878,remonetii:ing  the  silver  dollar,  pro- 


THE  SILVER  QUESTIOA\  \2^ 

In  the  demonetization  of  silver,  the  United 
States  followed,  from  a  similar  reason,  the  example 
of  England,  an  example  which,  for  the  same  rea- 
son, is  being  followed  by  all  other  great  commercial 
countries.     England,  as  was  natural,  took  the  lead, 

vided  that  there  shall  be  coined,  at  the  several  mints  of  the  United 
States,  silver  dollars  of  the  weight  of  412^  grains  troy  of  standard 
silver,  as  provided  in  the  act  of  January  iSth,  iS37,on  whicli  shall  be 
the  devices  and  the  superscriptions  provided  by  said  act,  which 
coins,  together  with  all  silver  dollars  heretofore  coined  by  the 
United  States  of  like  weight  and  fineness,  shall  be  a  legal  tender,  at 
their  nominal  value,  for  all  debts  and  dues,  public  and  private,  ex- 
cept where  otherwise  expressly  stipulated  in  the  contract.  And  the 
Secretary  of  the  Treasury  is  authorized  and  directed  to  purchase 
from  time  to  time  silver  bullion,  at  the  market  price  thereof,  not  less 
than  $2,000,000  worth  per  month,  nor  more  than  $4,000,000  worth 
per  month,  and  cause  the  same  to  be  coined  monthly,  as  fast  as  so 
purchased,  into  such  dollars  ;  and  a  sum  sufficient  to  carry  out  the 
foregoing  provision  is  hereby  appropriated  out  of  any  money  in  the 
Treasury  not  otherwise  appropriated.  And  any  gain  or  seigniorage 
arising  from  this  coinage  shall  be  accounted  for  and  paid  into  the 
Treasury,  as  provided  under  existing  laws  relative  to  the  subsidiary 
coinage  ;  Provided,  That  the  amount  of  money  at  any  one  time  in- 
vested in  such  silver  bullion,  exclusive  of  such  resulting  coin,  shall 
not  exceed  $5,000,000  ;  And  provided  further.  That  nothing  in  this 
act  shall  be  construed  to  authorize  the  payment  in  silver  of  certifi- 
cates of  deposit  issued  under  the  provisions  of  section  254  of  the 
Revised  Statutes. 

The  second  section  of  the  act  provided  for  inviting  the  countries 
composing  tlie  Latin  Union — France,  Italy,  Switzerland,  and  Bel- 
gium— which  had  entered  on  an  arrangement  in  reference  to  their 
coinage,  and  other  European  nations,  to  a  conference,  for  the  pur- 
pose of  establishing,  internationally,  a  relation  of  value  between  gold 
and  silver,  and  a  bi-metallic  basis  for  the  world. 

The  third  section  provided  that  "any  holder  of  the  coin  authorized 


126    RESUMPTION  AND  THE  SILVER  QUESTION. 

for  the  reason  that  she  long  surpassed  all  nations  in 
the  extent  of  her  manufacturing  and  commercial 
enterprises.  With  her  increased  wealth,  gold  be- 
came the  more  convenient  solvent  of  transaction 
than  silver.      This  is  the  sole  reason  for  the  change 

by  this  act  may  deposit  the  same  with  the  Treasurer  or  any  Assistant 
Treasurer  of  the  United  States,  in  sums  not  less  than  $io,  and  re- 
ceive therefor  certificates  of  not  less  than  $io  each,  corresponding 
with  the  denominations  of  the  United  States  notes.  The  coin  de- 
posited for  or  representing  the  certificates  shall  be  retained  in  the 
Treasury  for  the  payment  of  the  same  on  demand.  Said  certificates 
shall  be  receivable  for  customs,  taxes,  and  all  public  dues,  and, 
when' so  received,  may  be  reissued." 

This  bill  received  the  veto  of  the  President,  in  the  course  of  which 
he  said  :  "  If  it  is  now  proposed,  for  the  purpose  of  taking  advan- 
tage of  the  depreciation  of  silver  in  the  payment  of  debts,  to  coin 
and  make  a  legal  tender  a  silver  dollar  of  less  commercial  value 
than  any  dollar,  whether  of  gold  or  paper,  whicli  is  now  lawful 
money  in  this  counti-y,  such  a  measure,  it  will  be  hardly  questioned, 
will,  in  the  judgment  of  mankind,  be  an  act  of  bad  faith  as  to 
all  debts  heretofore  contracted.  The  silver  dollar  should  be  made 
a  legal  tender  only  at  its  market  value.  The  standard  of  value 
should  not  be  changed  without  the  consent  of  both  parties  to 
the  contract.  National  promises  should  be  kept  with  unflinching 
fidelity.  There  is  no  power  to  compel  a  nation  to  pay  its  just 
debts.  Its  credit  depends  on  its  honor.  The  nation  owes  what  it 
has  led  or  allowed  its  creditors  to  expect.  I  cannot  approve  a  bill 
which,  in  my  judgment,  authorizes  the  violation  of  sacred  obliga- 
tions. The  obligation  of  the  public  faith  transcends  all  questions  of 
profit  or  public  advantage.  Its  unquestionable  maintenance  is  the 
dictate  as  well  of  the  highest  expediency  as  of  the  most  necessary 
duty,  and  should  ever  be  carefully  guarded  by  the  Executive,  by  Con- 
gress, and  by  the  people.  It  is  my  firm  conviction  that  if  the  coun- 
try is  to  be  benefited  by  a  silver  coinage,  it  can  be  done  only  by  the 
issue  of  silver  dollars  of  full  value,  which  will  defraud  no  man.     A 


THE  SILVER  QUESTION.  127 

from  a  double  to  a  single  standard  in  that  country. 
The  latter  was  legally  established  in  18 16,  although 
gold  for  a  long  time  had  been  the  metal  chiefly  in 
use.  So  early  as  1805,  Lord  Liverpool,  in  his  cele- 
brated letter  to  the  king  on  the  "  Coins  of  the 
Realm,  "  urged  with  convincing  force  that  the 
coins  which  are  the  principal  measure  of  property 
should  be  of  one  metal  only,  and  that  that  metal 
should  be  gold,  being  the  metal  in  which  the  prin- 
cipal payments  had  been  made  for  the  last  hun- 
dred years. 

An  illustration  still  more  striking  than  that  afford- 
ed by  England  of  the  revolution  in  the  use  of  gold 
and  silver  as  money,  due  to  the  requirements  of  an 
enlarged  commerce,  and  in  accordance  with  the 
spirit  of  the  age,  is  that  afforded  by  France.  That 
country  has  been  regarded  as  especially  the  cham- 
pion of  the  silver  interest,  and  her  example  con- 
stantly appealed  to  as  an  argument  in  favor  of  the 
rcmonctization  of  silver  in  our  own.  So  far  from 
affording  any  argument  of  the  kind,  her  action,  for 
the  last  27  years,  presents  the  strongest  possible  rea- 
son against  it.  Up  to  1850  the  coinage  of  France 
had  been  almost   wholly  of  silver.     From   1795  to 

currency  worth  less  than  it  purports  to  be  worth  will  in  the  end  de- 
fraud not  only  creditors,  but  all  who  are  engaged  in  legitimate  busi- 
ness ;  and  none  more  surely  than  those  who  are  dependent  on  their 
daily  labor  for  thrir  daily  bread." 

The  bill  receiving  the  votes  of  two-thirds  of  the  members  of  each 
Ilouse,  became  a  law,  notwithstanding  the  veto  of  the  President. 


128     RESUMPTION  AND  THE  SILVER  QUESTION. 

1850,  its  total  coinage  of  gold  equaled  172,752,000 
francs;  of  silver,  4,204,366,000  francs.  From  1850  to 
1876  inclusive,  the  coinage  of  gold  equaled  8,074,- 
900,000  francs;  of  silver,  1,046,112,000  francs. 
For  the  period  first  named  (55  years),  the  excess  of 
the  coinage  of  silver  over  gold  equaled  4,03 1,6 14,- 
000  francs  ;  for  the  latter  period  of  27  years,  the  ex- 
cess of  coinage  of  gold  over  silver  equaled  7,028,- 
788,000  francs.  In  1850,  the  reserves  of  the  Bank 
of  France,  amounting  to  458,780,000  francs,  con- 
sisted of  11,980,000  of  gold  and  446,800,000  silver. 
On  the  23d  of  June,  1876,  the  coin  reserves  of  the 
Bank,  amounting  to  2,049,598,000  francs,  consisted 
of  ,1,463,400,000  of  gold  and  586,198,000  of  silver. 
In  1850,  the  proportion  of  gold  reserves  equaled 
about  2^  percent,  of  the  whole.  In  1876,  it  equal- 
ed about  75  per  cent,  of  the  whole. 

To  what  was  this  mighty  revolution  due  ?  Sim- 
ply to  the  vastly  increased  wealth  of  the  nation, 
and  to  a  wise  adaptation  of  means  to  ends.  Silver  is 
no  longer  the  convenient  standard  for  that  country, 
which  has,  consequently,  for  some  time  past  wholly 
ceased  coining  it.  The  problem  before  that  coun- 
try in  which,  whatever  the  reason,  the  amount  of 
metallic  currency  in  circulation  far  exceeds  that  in 
any  other,  was  the  substituting  gold  for  silver,  and 
discharging  the  latter  from  a  function  which  it  so 
long  exercised, — one  involving  very  grave  difficul- 
ties, and  requiring  very  great  wisdom  and  steadi- 
ness of  purpose  in  surmounting   them.     The   pre- 


TEE  SILVER  QUESTION.  129 

ceding  statement  shows  how  vast  the  progress  that 
has  already  been  made.  France  had,  and  still  has, 
large  sums  of  silver  to  be  disposed  of.  The  amount 
of  metallic  money  in  it,  in  1873,  was  estimated  by 
the  best  authorities  at  5,50o,ooo,cxx)  francs,  of 
which  4,000,000,000  consisted  of  gold  and  1,500,- 
000,000  of  silver.  There  is  probably  1,500,000,000 
less  silver  in  the  countrj^  than  there  was  in  1850; 
while  the  amount  of  gold  in  it  has  been  almost 
wholly  accumulated  since  that  time.  The  Bank 
of  France  long  postponed  resumption,  after  its 
suspension  in  1870  from  the  complications  grow- 
ing out  of  the  German  war,  in  order  to  be  in 
a  position  to  deal  with  the  question  before  the  na- 
tion in  a  more  independent  manner  than  it  could 
do  were  it  constantly  exposed  to  attack  from  the 
holders  of  its  notes.  At  no  time,  however,  were  its 
notes  at  any  considerable  discount.  Their  average 
depreciation  for  1873  equaled  only  three-quarters 
of  I  per  cent.  They  were  at  the  par  of  gold 
through  the  whole  of  1875,  1876,  and  1877,  the  Bank 
formally  resuming  January  ist,  1878.  Those  requir- 
ing gold  in  their  business  operations  could  always 
get  it ;  at  the  same  time  the  Bank  reserved  for  itself 
the  right  to  pay  it  or  not,  to  suit  its  ideas  of  what 
was  due  to  the  relations  it  sustained  to  the  great 
problem  Avhich  was  being  ^vorkcd  out  for  the  whole 
country.* 

*  The    following   statement  will   show    the   average  amount  in 


130     RESUMPTION  AND   THE  SILVER  QUESTION. 

The  third  great  commercial  country  of  Europe, 
Germany,  has  accompHshed  a  more  complete  rev- 
olution than  France  in  her  monetary  system.  Im- 
mediately upon  the  close  of  the  war  in  1870, 
Germany  entered  upon  the  reformation  of  its  cur- 
rency, which  then  consisted  chiefly  of  silver,  the 
object  being  to  establish  one  standard — gold,  sil- 

dollars  of  notes  in  circulation,  and  of  coin  reserves,  of  the  Bank  of 
France  for  the  past  five  j'ears  : 

Notes.  Coin  Reserves. 

1S73 $568,000,000  $157,000,000 

1874 542,000,000  197,000,000 

1875 507,000,000  314,000,000 

1876 499,000,000  368,000,000 

1877 511,000,000  435,000,000 

The  following  statement  will  show  the  amount  of  notes  of  differ- 
ent denominations  in  circulation  on  the  31st  of  January,  1877,  and 
on  the  25th  of  January,  1876. 

Jan.  31st,  1877.  Jan.  25lh,  1876. 

Notes  of                                                   Francs.  Francs. 

5,000 45 ,000  30,000 

1,000 1,412,820,000  1,110,123,000 

500 366,924,500  241,868,000 

200 649,000  682,000 

100 684,648,600  1,189,864,000 

50 -. 32,545,200  100,138,250 

25 824,650  995,250 

20 12,541,480  26,025,180 

5 1,093,820  1,288,620 

Old  notes 437,500  443,000 

Total 2,512,529,750  2,671,727,000 

It  will  be  seen  that  the  whole  amount  of  notes  in  circulation  of 
less  amount  than  50  francs,  or  10  dollars,  equaled,  January  31st, 


THE  SILVER  QUESTION.  131 

ver  to  take  the  place  of  subsidiary  coins.  In  1871, 
it  announced  that  the  law  for  the  demonetization 
of  silver  would  take  effect  January  ist,  1876.  At  the 
end  of  March,  1878,  the  whole  amount  of  old  coins 
w'ithdrawn  equaled  1,061,000,000  marks  (of  23.8 
cents  each),  of  which  91,000,000  marks  were  of 
gold,  and  970,000,000  of  silver.  The  government 
estimates  that  5,000,000  pounds  of  silver,  equaling 
320,000,000  marks,  or  $75,000,000,  arc  still  to  be 
taken  in.  The  total  amount  of  new  money  coined 
equaled  2,005,200,000  marks,  of  which  1,579,700,- 
000  were  of  gold,  and  425,500,000  marks  of  silver; 
the  subsidiary  silver  coins  being  only  about  one- 
fifth  of  the  whole. 

From  what  has  preceded,  it  will  be  seen  that  the 
final  demonetization  of  silver  by  the  United  States, 
in  1853  and  1873,  was  an  act  fully  in  harmony  with 
the  policy  of  all  great  commercial  nations  as  well 
as  the  dictates  of  convenience  and  common  sense. 
Never  before  in  this  country,  and  never  before  in 
any  other,  was  the  subject  of  coinage  made  the  oc- 
casion of  dividing  the  people  into  two  great  hostile 

1877,  only  the  aggregate  of  14,897,450  francs,  or  $2/979,490.  The 
absence  of  small  notes  in  France  is  one  of  the  reasons  for  its  enor- 
mous amount  of  metallic  money.  In  this  country  almost  the  whole 
amount  of  government  and  bank  notes  in  circulation  consists  of 
notes  of  $10  or  under.  In  England  no  notes  are  in  circulation  of 
less  amount  than  /"s  ;  but  in  that  country  every  one  in  business 
keeps  an  account  with  a  bank  or  banker,  and  makes  payments  by 
checks  drawn  for  any  sum. 


132    RESUMPTION  AND  THE  SILVER  QUESTION. 

camps ;  nor  has  it  been  before  suggested  that  a 
coinage  of  one  metal  was  appropriate  to  the  poor, 
and  that  that  of  another  was  appropriate  to  the 
rich.  As  well  might  it  be  urged  that  one  system 
of  weights  and  measures  was  appropriate  to  the 
rich,  who  could  buy  in  gross,  and  another  to  the 
poor,  whose  means  would  only  allow  them  to  buy 
piece  by  piece.  But  measures  with  which  the  rich 
buy  are  divided  off  into  parts  precisely  as  are  those 
used  by  the  poor.  But  it  is  useless  to  waste  time 
upon  a  question  like  this,  the  answer  to  which  is 
palpable  to  all  not  blinded  by  interest  or  passion. 

It  is  always  to  be  remembered  that  gold  and  silver, 
as  money,  are,  in  ratio  to  their  value,  always  equally 
costly  in  acquisition  and  maintenance.  A  dollar's 
worth  of  gold  will  always  command  a  dollar's  worth 
of  silver,  and  a  dollar's  worth  of  silver  will  always 
command  a  dollar's  worth  of  gold.  The  monctiza- 
tion  of  silver  will  add  not  a  single  dollar  to  the 
metallic  or  paper  money  in  circulation.  It  will 
rather  diminish  it,  as  with  the  use  of  inferior  instru- 
ments of  production  and  distribution  the  general 
result  will  be  less.  From  1851  to  i860  inclusive, 
the  country  was  practically  upon  a  mono-metallic 
basis,  there  being  no  legal-tender  silver  dollars  in 
circulation,  the  few  coined  having  been  exported 
at  their  bullion  value.  That  there  was  no  want  of 
metallic  money,  of  any  kind,  during  this  period  is 
shown  by  the  fact  that  within  it  the  excess  of  ex- 


THE  SILVER  QUESTION.  1 33 

ports  over  imports  of  coin  equaled  $417,742,000; 
the  former  equaling  $495,1 12,000,  the  latter,  %'J'J.,- 
588,000;  the  exports  exceeding  the  imports  by 
$41,764,200  annually.  During  the  same  period 
the  coinage  at  the  mint  of  the  United-  States 
equaled  $378,000,000,  more  than  three-fourths  of 
which  must  have-  been  exported.  The  total  issue 
of  legal-tender  silver  dollars  in  this  period,  the 
coinage  of  which  was  entirely  free,  equaled  $1,154,- 
190 ;  of  gold,  $330,263,000 ;  of  subsidiary  silver 
coins,  $46,583,000.  Why  was  not  a  larger  amount 
of  the  gold  and  silver  produced  in  the  country  re- 
tained in  it  ?  Simply  for  the  reason  that  it  was 
more  for  its  interest  to  export  than  to  retain  them. 
After  all  the  export,  there  was  a  plenty  left.  The 
period  referred  to  was  one  of  unexampled  pros- 
perity. Not  a  dollar  more  of  coin  would  have  re- 
mained in  the  country,  had  the  coinage  been  equal- 
ly divided  between  the  two  metals,  while  great  in- 
convenience and  loss  would  have  resulted  from 
any  attempt  to  force  an  equal  circulation  of  the 
two. 

The  necessary  effect  of  the  rcmonetization  of 
silver,  at  a  value  10  per  cent,  less  than  its  bullion 
value,  will  be  to  give  us  but  one  standard,  and  that 
differing  wholly  from  that  of  the  country  (England) 
through  which  all  our  remittances  and  payments 
to  foreign  countries  have  to  be  made.  The  stand- 
ard of  England  is  practically  that  of  all  commercial 


134    RESUMPTION  AND  THE  SILVER  QUESTION. 

countries.  All  our  money  shipped  to  that*  country 
will  not  be  money  there,  but  merchandise,  to  be 
converted  into  money  before  payment  can  be  made. 
For  such  purposes,  silver  would  not  necessarily  have 
any  preference  over  pork  or  flour.  It  would  con- 
stantly fluctuate,  like  these  articles,  so  that  an 
Arnerican  merchant  engaged  in  foreign  trade  could 
never  tell  how  he  stood,  or  the  amount  of  means 
necessary  for  the  payment  of  his  debts.  The  very 
fact  that  these  were  to  be  paid  at  a  certain  day, 
and  that  a  large  amount  of  silver,  the  money  of  his 
own  country,  but  of  no  other  with  which  he  was 
dealing,  was  to  be  thrown  upon  a  foreign  market, 
would  exert  a  powerful  influence  in  aggravating  the 
fluctuations  in  price  to  which  it  was  ordinarily  sub- 
ject. A  standard  of  value  for  ourselves  differing 
from  that  of  other  nations  will  have  the  effect  to 
throw  us  out  of  relations  with  all.  Our  whole 
commerce  with  them  will  then  be  in  the  form  of 
barter,  with  all  the  isolation  which  this  implies. 
We  shall  at  once  take  a  subordinate  position  in  ref- 
erence to  all,  and  this,  too,  at  the  very  moment 
when  our  own,  with  other  nations,  is  laboring  so 
persistently  and  earnestly  to  unite  all  in  closer 
bonds  by  a  system  of  coinage  and  a  standard 
common  to  all. 

Another  and  sufficient  objection  to  the  use  of 
silver  as  a  standard  of  value,  is  the  violent  fluctu- 
ations in  its  value.     Its  value  in  England,  from  1833 


THE  SILVER  QUESTION.  1 35 

to  1873,  averaged  about  60^/.,  the  standard  ounce; 
the  lowest  price  being  ^T%d.  in  1846,  the  highest 
62^^'.  in  1858.  Prices  in  this  country  necessarily 
correspond  with  the  prices  in  England.  The  fluctu- 
ations considerably  exceeded  i  per  cent,  annually. 
Had  silver  been  the  standard,  such  fluctuations, 
slight,  as  they  were,  would  have  been  productive 
of  great  disturbance  and  loss.  After  1872,  the 
fluctuations  became  much  more  rapid  and  excessive. 
Within  a  period  of  30  consecutive  days,  in  the 
latter  part  of  May  and  the  1st  of  June,  1876,  silver 
fell  from  ^2d.  to  46^^^.  the  ounce,  the  degree  of  fall' 
equaling  11  per  cent.  Had  silver  been  the  stand- 
ard, and  had  the  fall  been  a  permanent  one,  the 
purchasing  power  of  the  whole  paper  money  of  the 
kingdom,  equaling  $2,750,000,000,  would  have  fallen 
in  like  ratio,  the  aggregate  decline  equaling  S300,- 
000,000.  Such  a  fall  could  not  have  taken  place 
without  carrying  bankruptcy  and  ruin  throughout 
the  land.  As  it  was,  the  decline  of  value,  being 
that  of  but  one  article  of  merchandise  (silver 
bullion  probably  not  exceeding  in  amount  the  sum 
of  §60,000,000),  was  not  more  than  $C,6oo,ooo.  The 
difference  between  the  highest  and  lowest  price  of 
silver  throughout  the  year  equaled  nearly  21  per 
cent.,  the  range  being  between  sSj/*'/.  and  46I4C/. 
Had  a  corresponding  decline  in  the  purchasing 
power  of  the  paper  currency  of  the  kingdom  taken 
place,  the  amount  would  have  equaled  $577,500-- 
CXX)!     Of  course,  the  theoretical   effect,  where  the 


136    RESUMPTION  AND  THE  SILVER  QUESTION. 

price  was  constantly  fluctuating,  would  not  be  fully 
realized ;  but  it  would  be  realized  to  a  degree 
sufficient  to  disorganize  all  kinds  of  industry  and 
trade,  producing  an  incredible  amount  of  disturb- 
ance and  loss. 

The  amount  of  the  paper  money  of  this  country, 
including  notes  and  deposits  of  banks,  and  exclud- 
ing government  money,  equals  $1,250,000,000.  The 
fall  of  I  per  cent,  in  the  value  of  the  standard 
would  cause  a  corresponding  fall  in  the  paper  cir- 
culation of  the  country.  If  there  were  $300,000,000 
of  silver  coin  constituting  our  standard,  a  fall  equal 
to  I  per  cent,  of  it  would  reduce  the  purchasing 
power  of  the  whole  currency  of  the  country  by 
$15,500,000.  The  difference  between  the  highest 
and  lowest  prices  of  silver  for  each  month  in  1876, 
in  London,  and  consequently  in  this  country,, 
equaled  27  points,  the  aggregate  equaling  very 
nearly  50  per  cent,  of  the  value  of  the  metal.  Were 
the  daily  variations  calculated,  the  total  fluctua- 
tions for  the  year  would  amount  to  far  more  than 
the  price  of  the  metal  itself.  In  1858  the  silver  dol- 
lar of  the  United  States  was  at  a  premium  of  3.95  in 
gold  ;  in  1859,  ^t  a  premium  of  5.22  ;  in  i860,  at  a 
premium  of  4.58  ;  and  in  1 861,  at  a  premium  of  3.00. 
Its  fluctuations,  long  before  the  recent  decline  was 
even  anticipated,  proved  it  to  be  wholly  unfit  to 
serve  as  the  standard  of  value.  How  mUch  less  is 
it  fitted  to  be  the  standard  since  the  tremendous 
fluctuations  that  have  occurred  in  it  since  1873  ! 


THE  SILVER  QUESTION.  1 37 

The  great  sufferers  from  a  depreciated  and  fluc- 
tuating currency  are  always  laborers  for  wages ;  a 
class  which  composes  a  large  majority  of  the  citi- 
zens of  this  country.  They  are  the  chief  sufferers 
by  the  Silver  bill.  As  the  purchasing  power  of 
the  new  money  is  reduced  10  per  cent.,  their  wages 
will  be  reduced  lO  per  cent.  As  the  nominal  rate 
of  their  wages  will  long  remain  unchanged,  the 
rates  of  compensation  will  be  correspondingly  re- 
duced. In  time  they  may  get  some  relief,  but  only 
by  demonstrating  that  they  can  no  longer  subsist 
on  their  reduced  compensation.  Whatever  the 
disturbance  and  disaster  to  follow  the  remonetiza- 
tion  of  silver,  they  will  be  the  first  to  feel  the  ef- 
fect. They  haVe  no  mode  of  escape.  They  can- 
not well  change  their  places  or  occupations,  but 
must  toil  on,  as  best  they  can,  through  all  the 
calamities  that  befall  them.  The  products  of  their 
labor,  when  gathered  up  into  the  great  reservoirs, 
constitute  the  capital  of  the  United  States.  Upon 
them,  in  fact,  rests  the  great  fabric  of  society.  To 
every  one  of  them  the  monetization  of  silver  is 
an  unmitigated  evil.  The  difference  between  the 
nominal  and  the  real  value  of  the  coins,  their  labor 
must  in  great  measure  make  up. 


PART  IV. 


LEGAL-TENDER    CURRENCIES. 


LEGAL-TENDER   CURRENCY    OF    THE 
MONGOLS. 

THE  first  legal-tender  money  issued  on  a  large 
scale,  of  which  we  have  any  detailed  account, 
was  issued,  as  might  be  expected  from  the  priority 
of  its  civilization,  in  Asia: 

"  The  issue  of  paper  money  in  China,"  says  Colonel  Yule,  in 
his  edition  of  "  Marco  Polo's  Travels,"*  "  is  at  least  as  old  as 
the  beginning  of  the  ninth  century.  In  I  i6o,  the  system  had 
gone  to  such  excess  that  government  paper  equivalent  in  nomi- 
nal value  to  43,600,000  ounces  of  silver  had  been  issued  in  six 
years,  and  there  were  local  notes  besides,  so  that  the  empire 
was  flooded  with  rapidly  depreciating  paper. 

"  The  '  Kin  '  or  '  Golden  '  Dynasty  of  Northern  invaders  who 
immediately  preceded  the  Mongols  took  to  paper,  in  spite  of 
their  title,  as  kindly  as  the  native  sovereigns.  Their  notes 
had  a  course  of  seven  years,  after  which  new  notes  were  is- 
sued to  the  holders,  with  a  deduction  of  fifteen  per  cent." 

To  the  "  Kin  "  or  "  Golden  "  Dynasty  succeeded 
that  of  the  Mongols,  of  whose  paper  money  we  have 

*"  Marco  Polo's  Travels,"  edited  by  Colonel  Yule,  vol.  i.,  p.  380. 
John  Murray,  London,  1871. 


LEGAL-TENDER  MONEY  OF  THE  MONGOLS.     13^ 

the  following  account,  taken  from  the  24th  chapter 
of  Marco  Polo's  narration.  Polo  spent  a  consider- 
able portion  of  the  period  from  1275  to  1291  at  the 
court  of  Kublai  Khan,  and  was  in  a  position  to  be 
fully  informed  of  the  financial  system  of  the  great 
empire: 

"  Now  that  I  have  told  you  in  detail  of  this  splendor  of  the 
city  of  the  Emperor,  I  shall  proceed  to  tell  you  of  the  Mint 
which  he  hath  in  the  same  city,  in  the  which  lie  hath  his  mon- 
ey coined  and  struck,  as  I  shall  relate  to  you.  =*"■  *  *  The 
Emperor's  Mint,  then,  is  in  this  same  city  ol  Cambaluc  (now 
Peking),  and  the  way  it  is  wrought  is  such  that  you  might  say 
he  hath  the  Secret  of  Alchemy  in  perfection,  and  you  would 
be  right !     For  he  makes  his  money  after  this  fashion. 

"  He  makes  them  take  of  the  bark  of  a  certain  tree,  in  fact 
of  the  mulberry-tree,  the  Leaves  of  which  are  the  food  of  tiie 
silkworm.  *  *  *  What  they  take  is  a  certain  fine  white 
bast,  or  skin,  which  lies  between  the  wood  of  the  tree  and  the 
thick  outer  bark,  and  this  they  make  into  something  resem- 
bling sheets  of  paper,  but  black.  When  these  sheets  have  been 
prepared,  they  arc  cut  up  into  pieces  of  different  sizes.  Tlie 
smallest  of  these  sizes  is  worth  a  half  tornesel;  the  next,  a 
little  larger,  one  tornesel;  one,  a  little  larger  still,  is  worth 
lialf  a  silver  groat  of  V'enice;  another,  a  whole  groat;  others 
yet,  two  groats,  five  groats,  and  ten  groats.  There  is  also  a 
kind  worth  one  Bezant  ($10)  of  gold,  and  others  of  three  Be- 
zants, and  so  up  to  ten.  All  these  pieces  of  paper  are  issued 
with  as  much  solemnity  and  authority  as  if  they  were  of  pure 
gold  or  silver;  and  on  every  piece  a  variety  of  officials,  whose 
duty  it  is,  have  to  write  their  names,  and  to  put  tluir  seals. 
And  when  all  is  prepared  duly  the  chief  officer  (h'])Uted  l)y 
the  Khan  smears  the  seal  intrusted  to  him  with  vermilion, 
and  impresses  it  on  the  paper,  so  that  the  form  of  the  seal  re- 


140 


Kr.srMrriox  AXD  the  silver  question. 


e 


e 


mains  stamped  upon  it  in  red;  the  money  is  then  authentic. 
Anyone  forgint;  it  would  be  punished  with  death.  And  the 
Khan  causes  every  year  to  be  made  such  a  vast  quantity  of 
this  money,  which  costs  him  notiiing,  that  it  must  equal  in 
amount  all  the  treasure  in  tiie  world. 

"  With  these  pieces  of  paper,  made  as  I  have  described,  h 
causes  all  payments  on  his  own  account  to  be  made;  and  he 
makes  them  to  pass  current  universally  over  all  his  kingdoms 
and  provinces  and  territories,  and  whithersoever  his  power 
and  sovereignty  extend.  And  nobody,  however  important 
he  mciy  think  himself,  dares  to  refuse  them  oft  pain  of  death. 
And  indeed  everybody  takes  them  readily,  for  wheresoever  a 
person  may  go  throughout  the  great  Khan's  dominions,  he 
shall  find  these  pieces  of  paper  current,  and  shall  be  able  to 
transact  all  sales  and  purchases  of  goods  by  means  of  them 
just  as  well  as  if  they  were  coins  of  pure  gold.  And  all  the 
while  they  are  so  light  that  ten  Bezants'  worth  does  not  weigh 
one  golden  Bezant. 

"  Furthermore  all  merchants  arriving  from  India  or  other 
countries,  and  bringing  with  them  gold  or  silver  or  gems  and 
pearls,  are  prohibited  from  selling  to  any  one  but  the  Em- 
peror. He  has  twelve  experts  chosen  for  this  business,  men 
of  shrewdness  and  experience  in  these  affairs;  these  appraise 
the  articles,  and  the  Emperor  then  pays  a  liberal  price  for 
them  in  these  pieces  of  paper.  The  merchants  accept  his 
price  readily,  for,  in  the  first  place,  they  would  not  getsogood 
an  one  from  anybody  else,  and,  secondly,  they  are  paid  with- 
out any  delay.  And  with  this  paper  money  they  can  buy 
what  they  like  anywhere  over  the  Empire,  whilst  it  is  also 
vastly  lighter  to  carry  about  in  their  journeys.  And  it  is  a 
truth  that  the  merchants  will  several  times  in  the  year  bring 
wares  to  the  amount  of  400,000  Bezants,  and  the  Grand  Siri 
pays  for  all  in  that  paper.  So  he  buys  such  a  quantity  of  those 
precious  things  every  year  that  his  treasure  is  endless,  whilst 
all  the  time  the  money  he  pays  away  costs  him  nothing  at  all. 


LEGAL-TENDER  MONEY  OF  THE  MONGOLS.    141 

Moreover,  several  times  in  the  year,  proclamation  is  made 
throughout  .the  city  that  anyone  who  may  have  gold  or  silver, 
or  gems  or  pearls,  by  taking  them  to  the  Mint  shall  get  a 
handsome  price  for  them  (in  his  notes).  And  the  owners  are 
glad  to  do  this,  because  they  would  find  no  other  purchaser 
give  so  large  a  price.  Thus  the  quantity  they  bring  in  is 
marvelous,  though  those  who  do  not  choose  to  do  so  may  let 
it  alone.  Still,  in  this  way,  nearly  all  the  valuables  in  the 
country  come  into  the  Khan's  possession. 

"  When  any  of  these  pieces  of  paper  are  spoiled — not  that 
they  are  so  very  flimsy  either — the  owner  carries  them  to  the 
Mint,  and  by  paying  three  per  cent,  on  the  value  he  gets  new 
pieces  in  exchange.  And  if  any  baron,  or  any  one  else  so- 
ever, hath  need  of  gold  or  silver,  or  gems  or  pearls,  in  order 
to  make  plate,  or  girdles,  or  the  like,  he  goes  to  the  Mint  and 
buys  as  much  as  he  list,  paying  in  this  paper  money. 

"  Now  you  have  heard  the  ways  and  means  whereby  the 
Great  Khan  may  have,  and  in  fact  has,  more  treasure  than 
all  the  kings  in  the  world  ;  and  you  know  all  about  it,  and  the 
reason  why." 

"  Pauthier,"  says  Colonel  Yule,  "  has  given,  from  the  Chinese 
Annals  of  the  Mongol  Dynasty,  a  complete  Table  of  the  Issues 
of  paper  money  during  every  year  of  Kublai's  reign  (1260- 
1294),  estimated  at  their  nominal  value  in  Ting,  or  tens  of  sil- 
ver ounces.  The  lowest  issue  was  in  1267,  of  228,960  ounces, 
which  at  the  rate  of  120^/.  to  the  ounce  equaled  ^572, 400, 
and  the  highest  was  in  1290,  viz.,  50,002,500  ounces,  equiva- 
lent at  the  same  estimate  to  $125,066,250,  whilst  the  total 
amount  in  the  34  years  was  249,654,290  ounces,  or  $624,135,- 
720  in  nominal  value.  Well  might  Marco  speak  of  the  vast 
quantity  of  such  notes  that  the  Great  Khan  issued  annually!"* 

So  much  for  the  legal-tender  money  of  the  Great 

*  Yule's  Marco  I'olo,  vol.  i.,  p.  378. 


142     KKSl'MPTION  AND   THE  SILVER  QUESTION. 

Mogul,  Kublai  Khan,  from  which  our  own  is  faith- 
fully copied.  Its  circulation  was  enforced  by  pen- 
alties somewhat  more  rigid  than  those  by  which  we 
seek  to  enforce  that  of  our  own.  We  may  refuse 
to  receive  our  money,  perhaps  at  the  risk  of  starva- 
tion ;  but  the  Mongols  could  not  refuse  theirs  with- 
out the  loss  of  their  heads.  It  is  probable,  however, 
that  the  money  of  each  was  equally  current,  as  in 
both  countries  every  one  would  be  glad  to  get  it  at 
a  price.  The  same  formality  obtained  in  both  in 
the  mode  of  its  attestation  and  issue.  In  both,  the 
State — for  Kublai  Khan,  long  before  Louis  XIV.  was 
born,  and  with  far  more  reason,  uttered  the  kingly 
maxim,  "L'Etat  c'est  moi" — issued  whatever  it  re- 
quired. The  fancies  of  the  Khan  ran  to  gems  and 
gold  as  well  as  to  approved  munitions  of  war.* 
Merchants  undoubtedly  had  a  good  thing  in  the 
money,  as  they  could  sell  their  treasures  with  very 
little  higgling,  for  the  Khan  could  well  pay  a  good 
round  price  using  that  which  cost  him  nothing, 
while  they  could  pay  a  good  round  price  for  what- 
ever they  wished  to   purchase ;  the  people  having 

*  Kublai  Khan,  with  his  untold  treasures,  got  by  his  paper  money, 
undoubtedly  sat  as  the  original  of  Milton's  famous  picture  of  Satan. 
Milton  in  his  earlier  days  spent  a  considerable  time  in  Italy,  and 
must  have  been  well  read  in  the  works  of  the  great  traveler. 

"  High  on  a  throne  of  royal  slate,  which  far 
Outshone  the  wealth  of  Ormus  and  of  Ind, 
Or  where  the  gorgeous  East,  with  richest  hand, 
Showers  on  her  kings  barbaric  pearl  and  gold, 
Satan  exalted  sat." 


LEGAL-TENDER  MONEY  OF  THE  MONGOLS. 


143 


about  the  same  choice  in  taking  the  money  as  a 
defenseless  traveler  has  in  refusing  his,  when  de- 
manded by  a  dozen  resolute  footpads.  The  oc- 
casion of  the  issue  of  an  enormous  sum,  equaling 
$125,006,250,  in  one  year,  was  probably  a  "Black 
Friday,"  the  work  of  some  Mongol  speculator  (for 
human  nature  is  not  confined  to  races  or  political 
boundaries).  Some  tender-hearted  man,  a  dear 
lover  of  his  kind,  was  probably.  "  Secretary  of  the 
Treasury,"  and  undoubtedly  sought  to  assuage  the 
shock  by  a  bounteous  issue  of  money.  The  amount 
put  out  during  Kublai  Khan's  reign  was  fairly  plen- 
tiful, equaling  about  $20,000,000  annually,  and  fully 
proved  him  to  be  a  man  of  the  people.  His  ear 
was  always  open  to  the  cry  of  distress.  Were  he 
President  of  the  United  States,  with  the  power  he 
possessed  in  his  own  country,  the  outraged  South 
and  West  would  not  long  have  to  wait  the  full 
gratification  of  their  most  just  and  ardent  desires. 

"  The  Min^  Dynasty,"  continues  Colonel  Yule,  "  for  a 
time  carried  on  the  system  of  paper  money  ;  with  the  dif- 
ference that,  while  under  the  Mongols  no  other  currency  had 
been  admitted,  their  successors  made  payment  in  notes,  but 
accei)ted  only  hard  cash  from  their  people  !  In  1448  the 
chao  of  1,000  cash  was  worth  but  3  ! '' 

The  difference  between  the  Mongol  and  the 
Ming  dynasties  certainly  cannot  be  urged  in  favor 
of  the  latter.  The  Mongols  did  not  set  themselves 
up  as  better  than  other  people.  The  money  that 
was  good  enough  for  the  ruled  was  good  enough 


144    RESUMPTION  AND  THE  SILVER  QUESTION. 

for  the  ruler.  Indeed,  of  what  use  could  gold  and 
silver  be  as  money  when  they  had  a  plenty  of 
paper,  "  backed  by  all  the  wealth  of  the  empire — 
horses,  cattle,  and  lands,  as  well  as  the  gold  and 
silver  "  ?  The  greater  certainly  included  the  less. 
That  of  the  Mongols  was  Mr.  Butler's  ideal  money: 
a  plenty  for  the  country,  while  not  a  dollar  would 
circulate  in  any  other !  The  stream  was  always 
full.  Modern  "  balance  of  trade  "  never  reduced 
its  majestic  current.  The  Mings,  on  the  other 
hand,  were  "genuine  gold  worshipers,"  "  bloated 
bondholders,"  "  remorseless  Eastern  capitalists," 
paying,  or  contracting  to  pay,  in  paper,  but  accept- 
ing nothing  but  gold  !  Indeed,  their  action  in  prac- 
tically demonetizing,  by  refusing  to  receive,  paper 
money,  was  the  cause  of  its  falling  so  low  ;  just  as 
silver  fell  after  its  fraudulent  demonetization  in 
1873,  due  to  the  odious  moneyed  oligarchy  ! 

"  Two  notable  and  disastrous  attempts,"  continues  Colonel 
Yule,  "  to  imitate  the  Chinese  system  of  currency  took  place 
in  the  Middle  Ages  :  one  of  them  in  Persia,  apparently  in 
Polo's  very  presence;  the  other  in  India,  some  thirty-six  years 
later. 

"  The  first  was  initiated,  in  1294,  by  Kaikhatu  Khan,  when 
his  own  and  his  minister's  extravagance  had  emptied  the 
treasury,  on  the  suggestion  of  a  financial  officer  (Secretary 
of  the  Treasury),  called  Izzuddin  Muzaffar.  The  notes  were 
direct  imitations  of  Kublai's,  even  the  Chinese  characters 
being  imitated  as  part  of  the  device  upon  them  ;  the  Chinese 
name  chao  was  applied  to  them  ;  and  the  Mongol  resident 
at  Tabriz,   Pulad  Chingsang,  was  consulted  in  carrying  out 


LEGAL-TENDER  MONEY  OF  THE  MONGOLS.    145 

the  measure.  Expensive  preparations  were  made  for  this 
object  ;  offices,  called  Chao-Khanahs  (Sub-Treasuries),  were 
erected  in  the  principal  cities  of  the  provinces,  and  a  numerous 
staff  appointed  to  carry  out  the  details.  After  the  constrained 
use  of  the  chao  for  two  or  three  days  Tabriz  was  in  an  uproar; 
the  markets  were  closed  ;  the  people  rose  and  murdered 
Izzuddin;  and  the  whole  project  had  to  be  abandoned." 

The  Tabrizzians  were  certainly  the  most  singular 
people  the  world  has  yet  seen  ;  and,  judged  by  our 
own  standard,  and  by  the  laws  of-money  laid  down 
in    the   books,    stood    greatly    in    their  own    light. 
Why  should  they  not  have  accepted  a  money  which 
every  writer  upon  the  subject  has  pronounced  to  be 
as  good  as  gold  and  silver,  provided  only  that  it  did 
not  exceed  the  amount  of  gold  and  silver  it  dis- 
placed?    Why  did  they  not  use  this  lighter,  more 
portable,  and  more  convenient  money,  sending  off 
their  gold  and  silver  as  merchandise  to  other  coun- 
tries?    As  their  example  stands  alone  in  history, 
influences  must  have  been  at  work  of  which  Marco 
Polo  gives  ho  account,  though  he  was  at  the  time 
at  the  court  of  Kaikhatu  Khan.     These  influences 
were  undoubtedly  the  work  of  base  and  malevolent 
"  Eastern  capitalists,"  who  could  not  bear  to  see 
the  poor  people  come  so  easily  into  the  possession 
of  money  which  threatened  to  rival  and  supplant 
their  own,  heaped  up  with   such   infinite  patience 
and    toil.      They  undoubtedly  poisoned    the    pub- 
lic mind    against  the   new  money.      Pulad   Ching- 
sang,  to  whom  this  matter  was  intrusted  at  Tabriz, 
7 


146    J^ESUMPTIOX  A.VD   THE  SILVER  QUESTIOxV. 

should  have  played  his  cards  more  skillfully.  We 
do  things  better  at  Washington.  Our  Secretary  of 
the  Treasury  makes  everything  even  by  the  skillful 
application  of  a  wise  "  equivalency,"  so  that  the 
people  will  not  give  a  fig  for  the  choice  between 
gold,  silver,  and  paper.  The  want  of  such  an 
"  equivalency "  was  the  rock  upon  which  Pulad 
Chingsang  made  shipwreck  of  his  reputation ;  and 
the  '*  Secretary  of  the  Treasury,"  Izzuddin  Muzaf- 
far,  came  to  an  untimely  end.  The  failure  of  this 
scheme  is  the  more  singular  as  Kaikhatu  Khan  was 
a  nephew  of  the  great  Kublai,  and  had  the  benefit 
of  the  example  and  instruction  of  his  illustrious, 
benevolent  and  far-sighted  uncle. 


'fc>' 


"  The  other  like  enterprise,"  to  quote  from  Colonel  Yule, 
"  was  that  of  Sultan  Mahomed  Tughlak  of  Dellii,  in  1330-31. 
This  also  was  undertaken  for  like  reasons,  and  was  in  pro- 
fessed imitation  of  the  Chao  of  Cathay.  Mahomed,  however, 
used  copper  tokens,  instead  of  silver,  the  copper  being  made, 
apparently,  of  equal  weight  to  the  gold  or  silver  coin  which 
it  represented.  The  system  seems  to  have  had  a  little  more 
vogue  than  at  Tabriz,  but  was  speedily  brought  to  an  end  by 
the  ease  with  which  forgeries,  on  an  enormous  scale,  were 
practiced.  The  Sultan,  in  hopes  of  reviving  the  credit  of  his 
currency,  ordered  that  every  one  bringing  copper  tokens  to 
the  treasury  should  have  them  cashed  in  gold  or  silver.  The 
people,  who  in  despair  had  flung  aside  their  copper  coins  like 
stones  and  bricks  in  their  houses,  all  rushed  to  the  treasury 
and  exchanged  them  for  gold  and  silver.  In  this  way  the 
treasury  soon  became  empty,  but  the  copper  coins  had  as 
little  circulation  as  ever,  and  a  very  grievous  blow  was  given 
to  the  State." 


LEGAL-TENDER  MONEY  OF  THE  MONGOLS. 


147 


It  must  be  regarded  as  unfortunate  that  our 
"Secretary  of  the  Treasury"  did  not  hold,  under 
Sultan  Mahomed  Tughlak,  the  position  he  now  holds 
at  Washington  ;  or  rather,  that  Tughlak's  secretary 
had  not  had  some  prescience  of  the  methods  by 
which  our  Secretary  is  going  to  accomplish  results 
precisely  similar  to  those  in  vain  attempted  by 
Tughlak,  or  his  "  Secretary  of  the  Treasury."  The 
latter  should  never  have  attempted  to  thrust  reck- 
lessly upon  the  people  his  copper  coinage  at  the 
par  of  gold.  Gentle  methods  are  far  more  power- 
ful than  the  thunderbolt  itself.  The  new  coins,  as 
fast  as  they  came  from  the  mint,  should  never  have 
seen  daylight,  but  should  haye  been  stowed  away 
in  some  snug  corner  of  the  treasury,  and  certificates 
issued  therefor  in  the  following  fashion : 

^^fiinQiiom  of  Pcll)i. 

No.  13,331.  10,000  Chao. 

This  certificate  represents  10,000  copper  chao,  coined  at 
the  value  of  gold,  and  every  whit  as  good;  and  is  payable  to 
i;earer  on  demand.  It  is  also  receivable  at  the  par  of  gold  in 
payment  of  the  revenues. 

(Signed,)  JOHN  ALADDIN. 

Secretary  of  the  Treasury. 
I  Moharrem,  749." 

This  would  have  done  the  business,  for  who 
could  have  wanted  gold  when  copper  certificates 
would  have  answered  every  purpose  of  gold? 
Had  our  Secretary  lived  some  six  hundred  years 
ago,  he  might,  by  putting  his  certificate  method  so 


148     RESUMPTION  AND  THE  SILVER  QUESTION. 

early  in  practice,  have  revolutionized  history  by 
changing  the  face  of  the  world.  For  want  of  this, 
Tughlak  failed  in  a  most  excellent  scheme,  came 
within  an  ace  of  losing  his  head,  inflicted  a  grievous 
and  lasting  blow  upon  his  State,  and  checked,  per- 
haps for  centuries,  the  progress  of  mankind. 

The  end  of  Kublai  Kahn's  money  may  be  easily 
told.  When  he  paid  his  great  debt  to  nature, 
he  paid,  at  the  same  time,  all  lesser  ones. 

In  reference  to  the  note,  a  fac-simile  of  which  is 
given  as  a  frontispiece.  Colonel  Yule  says: 

"  I  have  never  heard  of  the  preservation  of  a  note  of  the 
Mongols  ;  but  some  of  the  Ming-  survive,  and  are  highly 
valued  as  curiosities,  in  China.  The  late  Sir  G.  T.  Staunton 
appears  to  have  possessed  one;  Dr.  Lockhart  formerly  had 
two,  of  which  he  gave  one  to  Sir  Harry  Parkes,  and  retains 
the  other.  The  paper  is  so  dark  as  to  explain  Marco's  de- 
scription of  it  as  black.  By  Dr.  Lockhart's  kindness  I  am 
enabled  to  give  a  reduced  representation  of  this  note,  as  near 
a  fac-simile  as  we  have  been  able  to  render  it,  but  with  some 
restrictioti,  e.  g.,  of  the  seals,  of  \Vhich  in  the  original  there 
is  the  faintest  indication  remaining."* 

*  Although  in  monetary  science  we  are  not  a  whit  in  advance  of 
the  Mongols  of  the  thirteenth  century,  we  need  not  wholly  lose  our 
self-respect,  hut  may  even  take  some  comfort  in  the  fact  that  we 
certainly  far  surpass  them  in  the  science  of  locomotion.  When 
Marco  Polo  was  at  the  court  of  the  Great  Khan,  in  1291,  there  came 
an  embassy  from  Arghun  Khan  of  Persia,  representing  that  his 
master's  favorite  Mongolian  wife,  having  recently  died,  had  desired 
to  be  succeeded  by  a  lady  of  her  own  tribe  from  her  native  land  of 
Cathay.     An    intelligent  and   lovely    maiden    of  seventeen    years, 


LEGAL-TENDER  OF  THE  REVOLUTION.      149 


THE     LEGAL-TENDER     CURRENCY    OF 
THE     REVOLUTION. 

The  second  government  paper-money  issued,  but 
far  eclipsed  by  that  of  the  Mongols,  on  a  grand 
scale,  was  that  of  the  Revolutionary  currency  of 
the  United  States.  The  government  at  the  time 
was  provisional,  having  no  other  purpose  than  the 
assertion  of  the  rights  of  the  colonies,  and  might 
cease  with  the  adjustment  of  the  controversy  with 
the  parent  country.  It  consisted  of  a  collection  of 
delegates  from  the  several  colonics,  and  lacked,  in 
theory   at   least,  the   power   of   taxation.     In  the 

rejoicing  in  the  name  of  Cocachin,  was  selected  by  the  great  Kublai 
as  the  future  spouse  of  his  nephew,  and  handed  over  to  the  em- 
bassy to  be  conveyed  to  her  new  hon»e.  Marco  I'olo,  wlio  had 
long  been  anxious  to  "carry  iiis  gear  and  his  gray  beard  to  his 
native  lagoons,"  solicited  permission  to  join  the  embassy.  Indeed 
the  Iddy  was  confided  to  his  especial  care  from  his  known  probity 
and  great  experience  as  a  traveler.  Something  ov^r  two  years 
elapsed  before  the  embassy,  \vith  its  fair  charge,  reached  Tabriz. 
Upon  its  arrival,  great  was  the  consternation  of  all  to  find  that 
Arghun  had  been  long  dead,  Kaikatu.  his  brother,  reigning  in  his 
stead — the  embassy  having  consumed  nearly  as  mucli  lime  in  go- 
ing to,  as  in  returning  from,  the  land  of  Cathay.  A  catastrophe  was 
happily  averted,  Tiie  princess,  as  sensible  as  slie  was  fair,  finding 
Gha/an  Khan,  son  of  Kaikhatu,  and  heir  ajiparent,  to  be  a  man  of 
good  fpialities  and  pleasing  address,  readily  transferred  her  affec- 
tions from  the  dead  to  the  living  ;  and  the  toils  and  dangers  of  the 
lf)ng  journey  were  quickly  forgotten  in  the  marriage  festivities 
which  followed. 


150     RESUMPTION  AND  THE  SILVER  QUESTION. 

emergency,  an  issue  of  notes  naturally  suggested 
itself,  although  the  disasters  resulting  from  similar 
issues  in  nearly  every  colony  must  have  been  fresh 
in  the  minds  of  all.  The  argument  of  necessity 
prevailed,  and  on  the  22d  of  June,  1775,  an  issue  of 
$3,000,000  was  made.  Such  was  the  beginning  of 
the  Continental  money,  as  humble  and  insignifi- 
cant in  the  outset  as  the  Genie  of  the  Arabian 
tales,  whom  a  small  bottle  at  first  sufificed  to 
hold,  but  who,  freed  from  his  imprisonment,  swelled 
into  proportions  so  vast  as  to  infold  both  sea  and 
land.  But  the  Genie  could  contract  as  well  as 
expand.  In  a  freak  of  vanity,  to  show  his  power, 
he  crept  back  again  into  the  bottle,  which  the  fish- 
erman, who  had  unwittingly  set  him  free,  instant- 
ly closed,  and  so  escaped  with  his  life.  Here  the 
parallel  ends ;  for  the  genie  of  the  printing-press, 
from  an  equally  insignificant  beginning  swelled  into 
proportions  still  vaster  than  those  of  his  prototype, 
which  no  power,  not  even  his  own,  could  reduce, 
and  could  be  got  rid  of  only  by  his  death,  but  not 
till  a  whole  nation  was  very  nearly  brought  to  the 
same  desperate  pass. 

The  following  is  a  copy  of  the  notes  first  issued  : 

"  CONTINENTAL    CURRENCY. 

"  No. dollars. 

"  This  hill  entitles  the  bearer  to  receive  [from  one  to  twen- 
ty] Spanish  milled  dollars,  or  the  value  thereof  in  gold  or 
silver,  according  to  the  resolution  of  the  Congress,  held  at 
Philadelphia,  on  the  loth  day  of  May,  A.D.  I775-" 


LEGAL-TENDER  OF  THE  REVOLUTIO.V.       151 

The  notes,  which  were  made  legal  tenders  by  the 
government,  as  well  as  by  the  Federal  States,  were 
distributed  among  the  latter  in  ratio  to  their  popu- 
lation, or  to  the  quotas  they  were  to  furnish  for  the 
war.  Each,  it  was  assumed,  would  undertake  to 
retire  the  amounts  awarded  it.  The  first  issue  be- 
ing soon  exhausted,  a  like  amount  w^as  ordered  on 
the  26th  of  November,  1775,  and  an  additional 
one  of  S4,ooo,ooo  on  the  17th  of  February,  1776. 
Before  the  close  of  1775,  however,  and  when  only 
about  $3,000,000  were  actually  in  circulation,  the 
notes  began  to  decline  in  value.  The  first  hesita- 
tion to  receive  them  was  on  the  part  of  the  Qua- 
kers, on  account,  it  was  alleged,  of  their  hostility 
to  war.  The  government,  or  Congress,  lost  no 
time  in  looking  into  the  matter,  and  on  the  17th 
of  January,  1776,  passed  an  order  that,  whoever 
should  refuse  to  receive  its  notes,  "  should  be 
deemed,  published,  and  treated  as  an  enemy  of 
his  country."  Newspapers  and  pamphleteers  im- 
mediately took  up  the  subject  and  proved,  to  their 
satisfaction,  the  notes  to  be  "  as  good  as  gold." 
The  groundwork  of  their  argument  was  that  what- 
ever was  agreed  upon  as  money,  was  money,  and 
equal  in  value  to  silver  and  gold. 

The  necessities  of  government  continuing,  a  fur- 
ther issue  of  $5,000,000  was  authorized  on  the  6th 
of  May,  1776.  A  serious  decline  in  the  value  of 
the  notes  followed.  Pursuant  to  directions  issued 
to  him,  General  rutnam,then  commanding  in  Phil- 


152     RESUMPTION  AND  THE  SILVER  QUESTION. 

adclphia,  issued  an  order  that  in  case  of  any  one 
refusing  to  take  the  money  for  goods  offered  to  be 
purchased,  such  goods  shquld  be  forfeited  and  the 
offender  thrown  into  prison.  The  necessary  effect 
of  such  order  was  to  accelerate  the  decUne,  so  that, 
in  December,  1776,  one  dollar  of  silver  would  com- 
mand two  of  paper.  Congress,  as  was  natural,  was 
greatly  alarmed,  and  on  the  4th  of  January,  1777, 
passed  a  resolution  that  "  its  notes  were  equal  in 
value  to,  and  ought  to  pass  at  the  rate  of,  gold  ;  and 
that  any  person  refusing  to  receive  them  at  such 
rate  should  be  deemed  an  enemy  of  his  country,  and 
should  forfeit  the  value  of  the  money,  or  of  the 
house,  lands,  or  commodity  offered  to  be  pur- 
chased." The  resolution  of  course  produced  no 
other  effect  than  to  hasten  the  decline. 

As  the  people,  in  numerous  instances,  refused  to 
take  them,  Washington  was  authorized  to  seize 
whatever  he  deemed  necessary  for  the  support  of 
the  army;  and  if  the  owner  would  not  accept  the 
notes  in  payment  at  a  fair  rate,  he  was  liable  to  be 
thrown  into  prison.  Such  penalty  was  speedily  re- 
inforced, by  the  passage  by  Congress  of  a  resolu- 
tion declaring  that  any  person  who  should  refuse 
to  receive  government  notes  offered  in  payment  for 
goods  should  forfeit  the  goods,  and  in  addition  pay 
a  fine  of  five  dollars  where  the  goods  purchased 
were  of  less  value  than  that  sum  ;  and  a  penalty 
equal  to  their  value  when  that  exceeded  five 
dollars.     For  a  second  offense,  the   offender  was 


LEGAL-  TENDER  OF  THE  RE  f  'OL  U TION.       \  5  3 

liable  to  banishment  from  the  State  to  any  place 
which  the  committees  of  safety  of  the  States 
where  the  offense  was  committed  might  desig- 
nate. 

Government,  having  no  other  resource,  continued 
the  issue  of  notes,  regardless  of  their  decline.  To 
sustain  their  price,  the  States  were  recommended  to 
establish  tariffs  of  prices.  The  New  England  States 
met  for  such  purpose,  by  delegates,  in  Providence, 
on  the  25th  of  Januar>^  1777,  and  established  a  rate 
by  which  a  bushel  of  wheat  was  to  be  sold  at  js.  6d. 
in  notes;  one  of  rye,  at  55-.;  a  gallon  of  rum  at 
6s.  Si/. ;  a  pound  of  raw  cotton  at  335-. ;  and  so 
on  through  the  whole  list  of  articles  entering  into 
consumption.  Other  States  followed  their  example. 
Government,  in  the  mean  time,  continued  the  issue 
of  notes,  which  for  the  year  1877  equaled  $13,000,- 
000.  Their  value  at  that  time  was  in  ratio  of  4 
to  I  of  specie.  To  meet  the  decline,  it  was  at- 
tempted to  reduce  their  amount  by  making  requi- 
sitions upon  the  States  for  $5,000,000.  Nothing 
came  of  these ;  on  the  other  hand,  the  amount  of 
notes  was  increased  by  repeated  issues,  so  that  by 
the  end  of  April,  1878,  their  total  amount  equaled 
$51,000,000.  In  May  of  that  year  came  the  news 
of  the  French  alliance,  in  consequence  of  which 
the  notes  rose  somewhat  in  value.  Congress  was 
greatly  elated,  and  issued  a  spirited  address  to  the 
people,  in  which  the  vast  resources  of  the  country, 
and  the  consequent  value  of  its  notes,  were  fully 

7* 


154    J^'F.'^UMPTION  AXD   THE  S/LJ'ER  QUESTIOAT. 

set  forth.  These  again  soon  and  largely  declined, 
and  correspondingly  increased  issues  had  to  be 
made,  government  ha\;.ing  no  other  resource.  By 
the  close  of  1778  the  whole  amount  outstanding 
reached  $101,500,000.  The  attention  of  reflecting 
minds  was  now  turned  to  the  situation  ;  and  the 
repeal  of  the  laws  seeking  to  make  the  value  of 
the  notes  equal  to  that  of  gold  was  already  urged. 
They  had  so  fallen  in  value  that  such  provision  was 
regarded  as  too  absurd  to  longer  have  a  place  upon 
the  statute-book.  This  suggestion  was  speedily 
adopted,  and  by  it  the  first  decisive  blow  was  given 
to  the  credit  of  the  notes.  It  was  an  acknowledg- 
ment of  a  difference  between  them  and  gold  ;  and 
if  so,  in  what  did  this  difference  consist  ?  The 
whole  question  of  their  value,  which  had  always 
been  avoided,  was  now  up  for  discussion.  Their 
holders  at  .once  saw  the  abyss  over  which  they 
stood.  It  was  charged  that  the  Act  of  Congress 
meant  repudiation.  This  was  indignantly  denied  ; 
Congress  as  usual  protested  its  good  faith — that 
every  dollar  of  its  notes  should  be  faithfully  paid. 
The  time,  however,  in  which  such  protestations 
could  have  effect  had  passed.  The  notes  continued 
to  decline  much  more  rapidly  than  ever.  That 
they  did  not  at  once  go  out  of  circulation  was  due 
to  the  fact  that  every  issue  served  to  pay  old  debts 
at  a  reduced  cost  to  the  debtor.  Swindling  was  at 
once  reduced  to  a  system.  Congress  all  the  time 
abetting  it  by  constant  issues,  always  put  upon  the 


LEGAL-TENDER  OF  THE  REVOLUTION.      155 

market,   each    at   a   less   rate  than  the  preceding 
one.* 

At  the  close  of  1778  the  value  of  the  notes  had 
sunk  in  the  ratio  of  8  to  i  of  coin.  Great  distress 
and  despondency  were  the  result.  The  most  po- 
tent enemy  with  which  the  government  had  now 
to  deal  was  its  own  money.  It  had  no  other  re- 
source, and  this  was  fast  failing  it.  As  a  neces- 
sary expedient,  it  invested  Washington  with  dic- 
tatorial powers.  But  he  was  almost  without  any 
other  resource  than  that  supplied  by  his  own  great 

*  It  is  well  known  that  Washington,  after  a  certain  period,  refused 
to  receive  the  government  notes,  in  payment  of  debts  contracted 
previous  to  its  issue.  The  following  extract,  from  Sparks's  "  Life 
of  Washington,"  will  sliow  what  he  thought  of  payments  made  in 
government  notes  (p.  443) : 

"  When  llie  army  was  at  Morristown,  a  man  of  respectable  stand- 
ing lived  in  the  neighborhood,  who  was  assiduous  in  his  civilities 
to  Washington,  which  were  kindly  received  and  reciprocated.  Un- 
luckily, this  man  paid  his  debts  in  the  depreciated  currency.  Some 
time  afterward,  he  called  at  headquarters,  and  was  introduced  as 
usual  to  the  General's  apartment,  where  he  was  then  conversing 
with  some  of  his  officers.  lie  bestowed  very  little  attention  upon 
the  visitor.  The  same  thing  occurred  a  second  time,  when  he  was 
more  reserved  than  before.  This  was  so  different  from  his  cus- 
tomary manner,  that  Lafayette,  who  was  present  on  both  occasions, 
could  not  help  remarking  it ;  and  he  said,  after  the  man  was  gone, 
'General,  this  man  seems  to  be  much  devoted  to  you,  and  yet  you 
have  scarcely  noticed  him.'  Washington  replied,  smiling,  '  I  know 
I  have  not  been  cordial  :  I  tried  hard  to  be  civil,  and  attemi)tcil 
to  speak  to  him  two  or  three  times  ;  but  that  Continental  money 
stopped  my  mouth.' " — Life  and  Writings  of  IVashitigton,  vol.  i., 
p.  133. 


156     RESUMPTION  AND  THE  SILVER  QUESTION, 

character.  For  want  of  pay  a  mutiny  broke  out  in 
the  army  stationed  at  Morristown,  threatening  the 
gravest  consequences.  This  was  only  averted  by 
the  influence  and  address  of  the  Commander-in- 
chief.  While  the  army  was,  for  want  of  means, 
unable  to  achieve  anything  worthy  of  itself,  and 
was  filled  with  discontent  bordering  upon  insubor- 
dination,  the  operations  of  commerce  and  trade 
were  completely  paralyzed.  Never  was  there  a 
more  wretched  picture  than  that  presented  by  the 
United  States,  during  the  reign  of  paper  money, 
for  the  four  years  beginning  with  1776  and  ending 
with  1779. 

The  financial  position  becoming  daily  more  and 
more  critical,  government  attempted  to  raise  the 
value  of  the  notes  by  reducing  their  amount  by 
requisitions  upon  the  States.  This  expedient  en- 
tirely failed.  New  notes  had  to  be  issued  in  large 
amounts,  and  matters  went  continually  from  bad  to 
worse.  A  corresponding  rise  in  prices  took  place, 
charged  to  forestallers  and  monopolizers,  and  to 
combinations  of  the  rich  to  oppress  the  poor.  Flour 
had  now  risen  to  nearly  a  dollar  a  pound  ;  salt  to 
forty  dollars  a  bushel,  and  all  other  articles  of  con- 
sumption in  equal  ratio.  In  the  leading  towns 
meetings  were  held  to  denounce,  in  the  words  of 
the  one  held  in  Boston,  "  monopolists  and  extor- 
tioners, who,  like  canker-worms,  are  gnawing  upon 
your  vitals ;  who  are  reducing  the  currency  to 
waste  paper  by  refusing  to  take  it  for  many  arti- 


LEGAL-TENDER  OF  THE  REVOLUTION. 


157 


cles.  We  have  borne  with  such  wretches,  but  we 
will  bear  with  them  no  longer.  Boston  shall  no 
longer  be  your  place  of  security.  Ye  inhabitants 
of  Nantucket,  who  first  introduced  the  accursed 
crime  of  refusing  paper  money,  quit  the  place,  or 
destruction  shall  attend  your  property,  and  your 
persons  shall  be  the  objects  of  vengeance  !  " 

Congress  still  went  on  as  in  the  past,  issuing  its 
notes,  and  issuing  addresses  to  show  their  unques- 
tioned value.  "  Let  us  suppose,"  it  said,  in  an  ap- 
peal to  the  people,  "  that  the  whole  debt  at  the 
close  of  the  war  will  equal  $300,000,000,  of  which 
$200,000,000  will  be  notes,  and  $100,000,000  inter- 
est-bearing debt  ;  such  a  sum  will  average  only  $100 
per  head.  What  is  such  a  paltry  sum  to  a  people 
occupying  and  owning  a  vast  continent,  and  whose 
numbers  double  every  twenty  years?  How  light, 
within  such  time,  will  be  the  burden  of  such  a 
debt !  The  share  of  the  poor  people  will  not  equal 
$10  a  head."  *  All  such  appeals  had  now  no  other 
effect  than  to  increase  the  general  alarm.  The 
amount  of  notes  issued  in  1779  equaled  $140,000,- 
000.  The  amount  realized  on  this  vast  sum  did 
not  probably  exceed  $5,000,000  in  coin.  The  total 
amount  of  the  notes  had  now  reached  $241,000,000. 
At  the  end  of  the  year,  when  their  issue  ceased, 


*  The  expenditures  of  the  United  Stales  for  1777  amounted  to 
$62,250,000  payable  in  notes,  $78,660  in  specie  and  $28,525  in 
livres. 


158     RESUMPTION  AND  THE  SILVER  QUESTION. 

their  value  had  fallen  to  40  for  i.  As  a  further 
issue  of  notes  similar  in  kind  was  not  to  be  thought 
of,  Congress  attempted  to  get  in  the  old,  in  order  to 
open  the  way  to  an  issue  of  new  notes  having  a 
higher  value.  It  made  requisitions  upon  the  States, 
payable  in  notes,  to  the  amount  of  $15,000,000 
monthly.  At  the  same  time  it  provided  that  the 
requisitions  might  be  paid  in  coin  at  the  rate  of 
one  to  forty  of  the  notes.  As  fast  as  the  old  notes' 
came  in,  new  notes  were  to  be  issued,  at  the  rate 
of  one  to  twenty  of  the  old,  payable  on  demand 
in  specie,  and  bearing  interest  at  the  rate  of  five 
per  cent.  It  was  hoped  that  the  provision  of  inter- 
est would  maintain  them  in  circulation.  The  pub- 
lic, however,  had  been  so  often  deceived,  that  no 
assurance  of  the  kind  coming  from  Congress  had 
any  effect  whatever.  The  days  of  Continental 
money  were  numbered.  Congress  did  not  attempt 
to  enforce  the  circulation  of  the  new  notes.  The 
old  continued  to  be  in  circulation,  and  to  be  active- 
ly dealt  in,  till  they  fell  to  the  rate  of  500  to  i. 
To  that  rate  of  depreciation  there  were  always 
enough  ready  to  take  them  in  the  expectation  that 
some  provision  might  ultimately  be  made  therefor. 

When  the  notes  went  wholly  out  of  circulation, 
they  were  still  legal  tender  at  their  nominal  value 
in  the  payment  of  debts.  Such  provision,  however, 
was  regarded  as  too  monstrous  to  be  availed  of  by 
the  most  unprincipled  and  desperate.     One  might. 


LEGAL-TENDER  OF  THE  REVOLUTION.       159 

with  the  same  reason,  have  offered  a  pebble,  picked 
up  on  the  streets.  Early  in  1781  Congress  took  up 
the  matter,  and  recommended  a  total  repeal  of  the 
legal-tender  quality  of  the  notes.  The  States  which 
had  made  the  notes  their  own  followed  with  simi- 
lar recommendations.  They  had  then  ceased  to 
have  any  market  value.  So  long  as  it  was  supposed 
that  they  possessed  any  value  resulting  from  the 
probability  of  their  payment,  the  legal-tender  pro- 
vision re-enforced  such  value.  When  the  public  be- 
came satisfied  that  the  notes  never  would  be  paid, 
the  clause  ceased  to  have  any  force  or  effect  what- 
ever. 

Upon  the  fall  of  the  government  currency,  the 
country  was  not  wholly  destitute  of  a  circulating 
medium.  In  anticipation  of  such  fall,  specie  had 
already  begun  to  make  its  appearance.  Before  the 
close  of  1780,  large  amounts  were  in  circulation. 
Where  it  came  from  no  one  could  tell.  "  Gold  and 
silver,"  said  Paine,  in  his  "Crisis,"  "that  for  a  while 
seemed  to  have  retreated  again  into  the  bowels  of 
the  earth,  have  once  more  arisen  again  into  circula- 
tion, and  every  day  adds  new  strength  to  trade, 
commerce,  and  agriculture."  The  disturbing  cause 
removed,  society  at  once  resumed  its  normal  condi- 
tion of  health  and  prosperity.  There  was  no  longer 
any  complaint  of  the  want  of  a  circulating  medium, 
though  this,  at  the  time,  consisted  wholly  of  foreign 
coins. 


l6o    RESUMPTION  AND  THE  SILVER  QUESTION. 

Its  effect  in  sweeping  away  the  accumulations 
of  the  past  was  by  no  means  the  greatest  evil  result- 
ing from  a  currency  of  government  notes. 

"  Thai  the  helpless  part  of  tlie  community,"  said  Ramsay, 
the  historian  of,  and  praminent  actor  in,  the  War  of  the  Rev- 
olution, "  were  legislatively  deprived  of  their  property  was 
among  the  lesser  evils  which  resulted  from  the  legal  tender  of 
depreciated  bills  of  credit;  the  inicjuity  of  the  laws  estranged 
the  minds  of  many  of  the  citizens  from  the  habits  and  love  of 
justice..  The  nature  of  obligations  was  so  far  changed  that 
he  was  reckoned  the  honest  man  who,  from  principle,  delay- 
ed to  pay  his  debts.  The  mounds  which  government  had 
erected  to  secure  the  observance  of  honesty  in  the  commer- 
cial intercourse  of  man  with  man  were  broken  down.  Truth, 
honor  ajid  justice  were  swept  away  by  the  overflowing 
deluge  of  legal  iniquity."* 

The  following  is  from  a  contemporary  writer, 
Pelatiah  Webster,  a  most  competent  witness  and 
observer  of  the  times  : 

"  It"  (government  money)  "has  polluted  the  equity  of  our 
laws  ;  turned  them  into  engines  of  oppression  and  wrong; 
corrupted  the  justice  of  our  public  administrations;  destroyed 
the  futures  of  thousands  who  had  the  most  confidence  in 
it ;  enervated  the  trade,  husbandry  and  manufactures  of  the" 
country  ;  and  went  far  to  destroy  the  morality  of  our  people. 
*  *  *  We  have  suffered  more  from  this  cause  than  from 
any  other  cause  or  calamity.  It  has  killed  more  men ;  per- 
verted and  corrupted  the  choicest  interests  of  our  country 
more,  and  done  more  injustice  than  even  the  arms-  and  artifice 
of  the  enemy." 

*"  History  of  the  Revolution,"  vol.  ii.,  page  134. 


LEGAL-TEXDER  CURRENCY  OF  FRANCE.     i6i 

After  the  fall  of  the  Continental  money,  no- 
thing more  was  heard  of  it  till  Mr.  Hamilton  en- 
tered upon  his  work  of  -adjusting  the  debts  of  the 
old  government  to  be  acknowledged  by  the  new. 
While  the  interest-bearing  debt  of  the  old  was  as- 
sumed, with  interest  at  its  full  amount,  the  notes, 
which  equaled  more  than  three  times  that  of  such 
debt,  were  "  cut  off  with  a  shilling."  They  were 
allowed  to  be  funded  at  the  rate  of  lOO  for  i.  This 
provision  was  made  in  their  favor  only  to  sliow  that 
they  were  not  quite  forgotten.  Not  a  voice  was 
heard  in  favor  of  any  more  generous  provision.  No 
attempt  was  made  to  raise  them  from  the  sepulchre 
in  which  they  had  been  so  long  entombed.  They 
were  chiefly  (as  will  always  be  the  case  when  the 
calamity  comes)  held  by  the  poor,  especially  by 
the  rank  and  file  of  the  army,  who  carried  them 
home  only  as  mementos  of  the  years  of  toil,  hard- 
sh^,  and  danger.  By  way  of  adding  a  grotesque- 
ness  to  the  strange  picture,  many  of  them  paid  away 
a  year's  earnings  for  a  single  breakfast,  or  for  a 
bottle  of  wine  to  drink  a  farewell  parting  with  old 
comrades  in  arms. 


THE     LEGAL-TENDER     CURRENCY     OF 

FRANCE. 

The  third  great  example  of  government  paper 
money  is  that  afforded  by  France.  When  the  Rev- 
olution of  1/89  broke  out,  the  nation  was  nut  only 
greatly  exhausted  from  past  excesses,  but  appeared, 


1 62     RESUMPTION  AND  THE  SILVER  QUESTION. 

in  the  confusion  which  prevailed,  incapable  of  pro- 
viding the  means  of  defense,  threatened  as  she  was 
with  attacks  from  all  the  great  powers  of  Europe. 
One  of  the  resources  naturally  suggesting  itself  was 
an  issue  of  government  money.  This  suggestion 
was  re-enforced  by  the  fact  that  the  estates  of  the 
Church,  valued  at  4,000,000,000  francs,  yielding  an 
income  of  200,000,000  francs,  had  been  confiscated 
to  the  State,  and  would  serve,  it  was  assumed,  as 
an  adequate  basis  for  such  currency,  the  holders  of 
which  were  to  have  the  right  to  exchange  it  for 
lands  at  a  fixed  valuation.  The  assignment  of  the 
lands  as  security  for  the  notes  gave  them  the  name 
by  which  they  have  always  been  distinguished — 
Assignats. 

The  proposition,  of  course,  met  with  vigorous 
opposition  from  prudent  and  sensible  men,  at  the 
head  of  whom  stood  the  celebrated  Necker.  The 
disastrous  effects  of  the  paper  money  of  John  Law,* 
which  so  convulsed  the  kingdom,  and  finally  re- 
duced it  to  a  condition  of  bankruptcy  and  ruin, 
were  still  remembered  by  the  aged.  Its  results 
were  familiar  to  all.  An  example  so  striking  would 
seem  to  be  conclusive.  The  argument  drawn  from 
it  was  easily  evaded.  "  Paper  money  under  a  des- 
potism," said  one  of  the  advocates  of  the  new  money- 

*  An  account  of  Law's  paper  n;ioney  is  not  given,  for  want  of 
space.  The  whole  amount  issued  equaled  about  3,000,000,000 
francs.  As  is -well  known,  it  was,  after  it  had  wrought  unspeakable 
mischief,  wholly  repudiated. 


LEGAL-TENDER  CURREXCY  OF  FRANCE.     163 

in  the  National  Assembly,  "  is  indeed  dangerous : 
it  favors  corruption  ;  but  in  a  nation  constitutionally 
governed,  and  which  itself  takes  care  of  the  emis- 
sion of  its  notes,  which  determines  their  number 
and  use,  that  danger  no  longer  exists."  Another 
member  declared  that  the  Assignats  would  render 
gold  and  silver  more  abundant,  by  drawing  them 
out  of  the  coffers  where  they  were  then  hoarded. 
In  vain  were  the  necessary  consequences  of  such  a 
currency  painted  in  all  their  length  and  breadth  ; 
in  vain  were  the  effects  of  Law's  currency  portrayed 
in  the  most  emphatic  language.  The  friends  of 
the  proposed  measure  easily  carried  the  day,  and 
in  April,  1790,  an  issue  of  400,000,000  francs  was 
authorized.  They  were  to  be  secured  by  a  pledge 
of  productive  real  estate,  and  to  bear  a  rate  of 
interest  equaling  three  per  cent.  Never  did  a 
currency  of  the  kind  seem  to  rest  upon  a  stronger 
basis,  while  the  provision  of  interest,  it  was  hoped, 
would  prevent  their  conversion  and  maintain  them 
in  circulation.  The  result  was  hailed  as  a  vast  tri- 
umph by  the  party  of  Revolution — by  the  party  of 
progress.  Tiic  Assembly,  in  an  address  issued  to 
the  French  people,  declared  that  the  nation,  "  by 
this  grand  means  had  been  delivered  from  all  un- 
certainty, and  from  all  the  ruinous  results  of  the 
credit  system — incessantly  a  prey  to  the  caprices  of 
cupidity;  that  the  issue  would  bring  back  intf)  the 
public  treasury,  and  into  all  branches  of  industry, 
strength,  abundance,  and  prosperity."  *  *  *  "  Paper 


164    RESUMPTIO\^  AND   THE  SILVER  QUESTION.  , 

money,"  continued  the  report,  "  is  Avithout  inherent 
vahic,  unless  it  represents  some  special  property. 
Without  representing  some  special  property,  it  is 
inadmissible  in  trade  to  compete  with  a  metallic 
currency,  which  has  a  value  real  and  independent 
of  the  public  action  ;  therefore  it  is  that  the  paper 
money,  which  has  only  the  public  authority  as  its 
basis,  has  always  caused  ruin  where  it  has  been 
established  ;  that  is  the  reason  why  the  bank  notes 
of  1720,  issued  by  John  Law,  after  having  caused 
terrible  evils,  have  only  left  frightful  memories. 
Therefore  it  is  that  the  National  Assembly  has  not 
w'ished  to  expose  you  to  this  danger,  but  has  given 
this  new  paper  money,  not  only  a  value  derived 
from  the  national  authority,  but  a  value  real,  im- 
nmtablc ;  a  value  which  permits  it  to  sustain  ad- 
vantageously a  competition  with  the  precious  met- 
als themselves.  '"  *  *  These  Assignats,  bearing 
interest  as  they  do,  will  soon  be  considered  better 
than  the  coin  now  hoarded,  and  will  again  bring  it 
out  into  circulation." 

The  first  effects  of  the  issue  seemed  to  justify 
all  the  considerations  urged  in  its  favor,  and  to 
confound  all  who  opposed  it.  The  public  treasury 
was  relieved.  An  amount  of  gold  and  silver  coin 
equal  to  that  of  the  notes  was  discharged  from 
use  as  money,  and  became  merchandise  for  export. 
The  wealth  of  the  nation  seemed  to  be  increased 
in  like  ratio.     By  the  end  of  August,  however,  no 


LEGAL-TEXDER  CURRENCY  OF  FRANCE.     165 

little  dismay  was  produced  by  the  fact  that  the 
first  issue  had  been  wholly  exhausted,  leaving  the 
government  as  destitute  as  ever.  The  old  remedy 
again  suggested  itself  with  still  greater  force — it 
was  so  facile,  and  at  the  same  time,  so  effectual. 
Its  opponents,  seeing  the  tendency  and  the  inev- 
itable results  that  were  to  follow  unless  it  could  be 
checked,  made  a  far  bolder  stand  than  against  the 
first  issue.  It  was  for  a  time  by  no  means  certain 
to  which  side  the  Assembly  would  incline.  A  com- 
mittee to  whom  the  subject  was  referred  did  not,  in 
terms,  recommend  a  further  issue,  but  declared 
that  the  first  issue  had  been  successful ;  that  the 
notes  were  the  most  economical  means  to  be  re- 
sorted to ;  and  that  the  country  was  in  great  peril, 
and  "  was  still  to  be  saved  "  ! 

The  bill  for  the  second  issue  being  introduced, 
Mirabeau,  the  great  figure,  not  only  iit  the  Assem- 
bly, but  in  France,  threw  all  the  force  of  his  in- 
fluence and  character  in  favor  of  this  measure, 
although  in  a  letter  written  early  in  1789  he  had 
spoken  of  paper  money  as  "  a  nursery  of  tyranny, 
corruption,  and  delusion  ;  a  veritable  debauch  of 
authority  in  delirium."  He  may  still  have  enter- 
tained the  same  sentiments,  at  the  same  time 
yielding  to  what  he  deemed  a  state  necessity. 
The  first  issue,  he  declared,  had  worked  well ;  it  was 
a  kind  of  money  entirely  different  from  that  of 
Law;  no  harm  could  result  from  its  issue;  the 
French  had  now  become  so  enlightened  that  "  dc- 


l66    RESUMPTION  AND   THE  SILVER  QUESTION. 

ccptivc  subtleties  can  no  longer  deceive  patriots 
and  men  of  sense  in  this  matter.  We  must  go 
on,"  he  continued,  "  to  accomplish  what  we  have 
begun.  The  paper  is  guaranteed  by  the  national 
lands,  and  by  the  good  faith  of  the  French  nation. 
So  soon  as  it  becomes  too  abundant  it  will  be  ab- 
sorbed in  rapid  purchases  of  the  lands."  He  pre- 
dicted that  the  members  of  the  Assembly  would 
be  surprised  at  the  astonishing  success  of  the 
money,  and  that  there  never  would  be  a  super- 
abundance of  it.  Another  speaker,  Gouy,  pro- 
posed to  liquidate  the  whole  national  debt  "  by  an 
issue  of  2,400,000,000  of  money  by  one  single 
operation — grand,  simple,  and  magnificent !  "  He 
advocated  a  plebiscite — an  appeal  to  the  people — 
"who,"  he  said,  "  ought  alone  to  give  law  in  a  mat- 
ter so  interesting." 

To  all  such  arguments,  or  rhapsodies  rather,  the 
opponents  could  only  reply  by  predicting — by 
demonstrating  the  inevitable  result — a  decline  in 
the  value  of  the  notes,  their  constant  increase  as 
new  necessities  arose,  and  their  final  collapse,  which 
was  to  involve  all  interests  and  all  classes  in  a  com- 
mon ruin,  and  of  which  Law's  money  afforded  such 
a  striking  example.  In  vain  did  Necker  oppose 
his  great  presence,  his  great  wisdom,  his  great 
experience  and  his  great  character,  only  to  be 
defeated,  and  in  the  end  to  be  driven  from  his 
country.    Talleyrand,  who,  next  to  Necker,  exerted 


LEGAL-TEXDER  CURRENCY  OF  FRANCE. 


167 


the  most  powerful  influence  against  the  measure, 
stated  the  whole  question  in  a  single  sentence: 
"You  can,  indeed,  arrange  it  so  that  the  people 
shall  be  forced  to  take  a  thousand  francs  in  paper 
for  a  thousand  francs  in  specie  ;  but  you  can  never 
arrange  it  so  that  a  man  shall  be  obliged  to  give  a 
thousand  francs  in  specie  for  a  thousand  francs  in 
paper.  In  that  fact  is  imbedded  the  entire  ques- 
tion ;  and  on  account  of  that  fact  the  whole  system 
fails." 

The  question  of  the  new  money  engrossed  not 
only  the  Assembly,  but  the  nation.  The  mercan-' 
tile  classes  almost  unanimously  opposed  the  issue. 
Of  the  memorials  that  came  from  thirty-two  lead- 
ing towns,  twenty-five  opposed,  and  only  seven 
favored  the  issue  of  the  notes.  The  Assembly 
itself  was  nearly  equally  divided.  The  uncer- 
tainty and  importance  of  the  issue  stimulated 
Mirabeau  to  the  highest  pitch  of  eloquence.  In 
his  final  speech  he  asserted  the  value  of-the  notes, 
declared  that  each  would  represent  a  specific 
appropriation  of  land.  "  I  .would  rather,"  he  ex- 
claimed, "  have  a  mortgage  of  a  garden  than  of  a 
kingdom.  If  gold,"  he  continued,  "  has  been 
hoarded  through  timidity  or  malignity,  the  issue  of 
paper  will  show  that  gold  is  not  necessary,  and  it 
will  come  fortii."  In  vain  was  it  replied  that  pre- 
cisely the  same  arguments  were  used  aiul  paved 
the  way  to  the  issue  of  John   Law's  money;  that 


1 68     RESUMPTION  A. YD   THE  SILVER  QUESTION. 

that  was  to  be  limited  in  amount,  and  always  to  be 
completely  secured  ;  that  the  apparent  advantages 
of  the  first  issue  were,  in  the  same  way,  urged  as 
the  reason  for  the  second ;  and  that,  upon  such 
reasons,  issue  followed  issue,  till  France  was  in- 
volved in  bankruptcy  and  ruin.  In  vain  was  one  of 
Law's  notes,  saved  from  the  wreck  of  time,  held  up 
before  the  Assembly  as  a  memento  of  the  past,  and 
as  a  warning  for  the  future.  It  was  replied  that 
"  Law's  money  was  based  upon  the  phantoms  of 
the  Mississippi,  while  ours  rests  upon  the  solid 
basis  of  ecclesiastical  lands."  The  newspapers  of 
'the  day  powerfully  re-enforced  the  prevailing  senti- 
ment by  declaring  land  to  be  a  far  superior  basis 
for  ^n  issue  of  paper  than  gold.  Such  sophistries 
as  these,  supported  by  the  efforts  of  government, 
through  its  officials,  prevailed,  *and  the  measure 
passed  by  a  small  majority — the  ayes  being  508, 
and  the  nays  423.  It  authorized  the  issue  of 
800,000,000  of  notes ;  but  provided,  in  the  most 
emphatic  terms,  that  in  no  case  should  the  whole 
amount  put  into  circulation  exceed  that  and  t lie  pre- 
vious issue,  i.  e.,  1,200,000,000  of  francs.  It  also 
provided,  in  order  to  maintain  a  healthy  contrac- 
tion, that  all  the  notes  received  for  lands  should  be 
immediately  burned. 

So  much  for  the  humble  beginnings  of  the  deluge 
which  was  to  sweep,  with  resistless  force,  over  the 
land,  carrying,  at  last,  everything  in  its  train.     In 


LEGAL-TEiXDER  CURRENCY  OF  FRANCE. 


169 


such  measures  one  argument  stands  for  all — an 
apparent,  necessity  which  those  in  power  have  not 
the  courage  to  face.  The  most  solemn  assertions 
that  the  issue  shall  never  exceed  a  certain  amount; 
shall  be  so  moderate  that  the  notes  can  never  work 
harm  ;  that  their  payment  is  secured  beyond  con- 
tingency are  the  seductive  influences  which  lead  to 
the  first  fatal  step.  This  taken,  all  beyond  follows 
as  an  inevitable  necessity.  While  the  tide  is  swell- 
ing, nothing  but  congratulations  are  heard  on  every 
hand.  Of  such  examples  we  copy  the  following 
from  a  pamphlet  signed  "  A  Friend  of  the  Revolu- 
tion," published  in  Paris  just  after  the  passage  of 
the  bill  authorizing  the  second  issue : 

"  Citizens,  the  deed  is  done.  The  assignats  are  the  key- 
stone of  the  arch.  It  has  just  been  happily  put  in  position. 
Now  I  can  announce  to  you  that  the  Revolution  is  finished, 
and  there  only  remain  one  or  two  important  questions.  All 
the  rest  is  but  a  matter  of  detail  which  cannot  deprive  us  any 
longer  of  the  pleasure  of  admiring,  in  its  entirety,  the  impor- 
tant work.  The  provinces  and  the  commercial  cities  which 
were  at  fir^  alarmed  at  the  proposal  to  issue  so  much  paper 
money,  now  send  expressions  of  their  thanks  ;  specie  is  com- 
ing out  to  be  joined  with  paper  money.  Foreigners  come  to 
us  from  all  parts  of  Europe  to  seek  their  happiness  under 
laws  which  they  admire  ;  and  soon  France,  enriched  by  her 
new  property,  and  by  the  national  industry  which  is  prepar- 
ing for  fruilfulncss,  will  demand  still  another  creation  of 
paper  money." 

The  nation,   now   fairly  committed    to  the  new 
money,  neglected  all  other  methods  f<jr  providing 
8 


i;?0    RESUMPTION  AND  THE  SILVER  QUESTION. 

for  expenses  rendered  necessary  by  dangers  which 
threatened  on  every  hand.  The  second  issue  was 
not  Only  soon  exhausted,  but  prices  rose  in  ratio 
to  its  amount,  leaving  the  great  mass  more  necessi- 
tous than  ever,  and  more  clamorous  than  ever  for 
more  money.  As  the  effect  of  such  money  was  to 
exhaust,  in  a  like  degree,  instead  of  adding  to,  the 
wealth  of  the  nation,  there  seemed  to  be  no  re- 
source left  but  a  continued  issue  of  it.  For  a  mo- 
ment some  relief  was  gained  by  reissuing,  instead 
of  burning,  as  required  by  law,  the  notes  received 
for  lands.  The  first  150,000,000  so  received  were 
immediately  paid  out ;  but  these  were  a  drop  in  the 
bucket  compared  with  the  amount  now  required. 
The  cry  of  a  "lack  of  circulating  medium"  grew 
fiercer  and  fiercer,  and  was  met,  from  the  sheer 
necessity  of  the  case,  by  an  issue,  on  the  17th  of 
June,  1791,  of  600,000,000  of  new  notes,  in  spite  of 
the  solemn  legal  provision  that  not  a  franc  over 
1,200,000,000  should  be  issued.  This  issue  met 
with  little  opposition,  those  who  opposed  the  first 
and  second  being  thoroughly  disheartened,  in  exile, 
or  dead.  There  was  now  but  one  voice — that  of 
universal  approbation  and  acclaim.  By  this  time 
the  Jacobin  clubs,  which  were  fast  becoming  the 
real  power  in  France,  added  their  potent  voice  to 
the  general  demand.  From  such  there  was  no  ap- 
peal. The  effect  upon  the  public,  so  far,  had  been 
that  of  a  highly  stimulating  potion  to  a  powerful 
frame.     France  was  in  an  ecstasy  of  activity  and 


LEGAL-TEXDER  CURREXCY  OF  FRAXCE.     i-ji 

joy.  A  few  clouds,  however,  soon  appeared  in  the 
horizon.  The  price  of  the  notes  steadily  fell.  The 
decline  was  attributed  to  various  causes ;  one  to 
a  want  of  knowledge,  on  the  part  of  the  people,  of 
their  real  worth.  To  meet  the  decline,  an  address 
was  voted  by  the  Assembly,  setting  forth  the  good- 
ness of  the  currency,  and  the  absurdity  of  pre- 
ferring coin.  Another  cloud  was  the  almost  entire 
disappearance  of  specie.  Various  were  the  theories 
offered  in  explanation.  The  leading  newspaper  at 
the  time  undoubtedly  expressed  the  public  senti- 
ment when  it  declared  that  "  coin  will  keep  rising 
until  the  people  have  hung  a  broker."  English 
emissaries,  it  was  alleged,  were  instilling  notions 
hostile  to  paper,  and  more  than  one  innocent  per- 
son fell  a  victim  to  the  popular  wrath,  under  the 
assumption  of  being  engaged  in  raising  gold  and 
depressing  paper.  It  was  a  crime  to  be  found  in 
the  possession  of  coin ;  death  was  suggested  as  a 
proper  penalty  for  those  hoarding  it. 

It  was  not  long  before  the  delirium  began  to  tell 
upon  the  nation.  The  price  of  the  money  steadily 
declined,  and  that  of  all  kinds  of  merchandise  as 
steadily  rose.  The  markets  were  glutted  with 
goods  which  no  one  could  afford  to  buy.  Immense 
importations  were  made  from  abroad  which  could 
be  paid  for  only  in  coin.  The  effect  of  the  first 
issues  had  been  to  create  an  extraordinary  activity. 
Manufacturers  were  stimulated  to  an  encn-mous 
excess  of  production.     When  the  tide  turned,  this 


12-2     RESUMPTION  AND  THE  SILVER  QUESTION. 

class  was  the  first  to  give  way.  No  one  could  tell 
whether  that  which  he  produced  would  bring  fifty 
or  a  hundred  francs ;  or  whether  it  would  have  any 
market  value  whatever.  With  the  breaking  down 
of  the  manufacturers,  immense  numbers  of  work- 
men were  thrown  out  of  employment.  These  soon 
became  an  organized  mob,  waging  relentless  war 
against  all  order  and  property.  All  the  operations 
of  society  were  reduced  to  mere  games  of  hazard. 
"  Commerce,"  to  use  the  language  of  one  of  the 
leading  economists  of  France,  "  was  dead.  Betting 
took  its  place."  "  What  shall  I  say  ? "  said  an- 
other writer,  "  of  the  stock-jobbing,  as  frightful  as 
it  is  scandalous,  which  goes  on  in  Paris  under  the 
very  eyes  of  our  legislators;  a  most  terrible  evil, 
and  yet,  under  the  present  circumstances,  a  neces- 
sary evil?"  The  great  mass  of  the  gamblers  were 
speedily  reduced  to  poverty,  and  became  the 
leaders  of  the  populace,  now  reduced  to  the  last 
extremity  of  want  and  despair.  The  spirit  of  spec- 
ulation spread  from  Paris  into  all  the  departments, 
and  everywhere  produced  like  results.  "  What 
a  prospect,"  said  von  Sybel,  the  great  historian 
of  that  period,  "  for  a  country,  when  its  rural  pop- 
ulation was  changed  into  a  great  band  of  gamblers  ! " 
As  the  value  of  the  currency  was  always  fluctuating, 
each  party  to  an  exchange  was  always  on  the  alert 
to  save  himself  from  loss  by  attempting  to  over- 
reach the  other.  In  this  way  almost  every  act 
became  an  incentive  to,  or  was  tainted  with,  fraud. 


LEGAL-TEXDER  CURREXCY  OF  FRAXCE.     173 

Public  and  private  morality  were  alike  overthrown  : 
Mirabeau.  himself  was  only  a  stipendiary  of  the 
Court.  Numerous  others,  only  a  little  less  distin- 
guished, were  in  the  market,  to  be  bribed  equally 
by  the  Court  or  those  who  basked  in  its  favors. 
Society  itself  seemed  hardly  capable  of  continued 
existence.  All  public  spirit  was  at  an  end.  All  in 
debt  now  wished  to  see  the  decline  in  the  value  of 
the  government  money,  as  their  burdens  would  be 
reduced  in  like  ratio.  During  the  periods  of  infla- 
tion everybody  ran  into  debt,  hoping  to  make  mon- 
ey by  the  rise  in  what  was  purchased.  Immense 
amounts  of  the  forfeited  Church  lands  were  pur- 
chased, small  payments  only  having  been  made  at  the 
time.  The  purchasers  were  in  danger  of  losing  all 
they  paid.  It  became,  in  fact,  the  interest  of  almost 
all  persons  of  influence  to  depreciate  and  discredit 
the  government  in  every  way  possible.  Every  one 
who  sought  to  sustain  it,  protect  its  rights,  or  to 
maintain  order,  was  an  enemy  of  the  people.  Great 
numbers  speedily  paid  the  highest  penalty  for  such 
crimes.  Speculators,  members  of  the  Jacobin  clubs 
and  leaders  of  the  mob  became  prominent  members 
of  the  Assembly,  and  soon  secured  almost  absolute 
control  of  that  body.  In  the  meantime  the  cry  for 
more  money  arose  louder  and  louder.  In  Decem- 
ber, 1 79 1,  300,000,000  more  of  francs  were  author- 
ized, making  the  total  issue  2,100,000,000.  As 
might  be  expected,  such  a  state  of  things  gave  rise 
to    the    most    absurd    theories,  one  of    which  has 


174     R^SUMPriON  AND  THE  SILVER  QUESTION. 

lately  been  reproduced  by  a  notorious  character 
in  the  United  States:  that  the  currency  of  a  coun- 
try should  be  of  a  kind  that  would  have  no  circula- 
tion out  of  it.  In  this  way,  all  its  commerce  and 
trade  would  be  wholly  independent  of  that  of 
other  nations.  It  was  openly  proclaimed  that  the 
laws  of  political  economy,  however  applicable  to 
other  times  and  to  other  nations,  and  however 
"  suited  to  the  minions  of  despotism,  were  not  ap- 
plicable to  the  enfranchised  inhabitants  of  P'rance 
at  the  close  of  the  1 8th. century."  In  proof,  on  the 
30th  of  April,  1792,  came  the  fifth  issue,  amounting 
to  300,000,000.  Other  issues  continued  to  follow 
in  rapid  succession,  till  the  whole  amount  put  out 
to  the  14th  of  December,  1792,  equaled  3,400,000,- 
000,  of  which  2,800,000,000  remained  in  circulation. 
Early  in  1793  came  a  new  source  of  wealth  to  the 
nation — the  confiscated  estates,  having  an  estimated 
value  of  3,000,000,000,  of  the  nobles  and  landed 
proprietors  who  had  fled  the  country.  As  a  neces- 
sary consequence,  new  issues  of  paper  money  based 
upon  such  lands  were  made ;  prices  rose  enormous- 
ly, both  from  the  abundance  of  the  money  and  the 
unwillingness  of  holders  of  merchandise  to  receive 
it.  The  people,  who  had  no  longer  any  means  of 
purchase,  and  who  were  on  the  verge  of  starvation, 
took  the  law  into  their  own  hands.  Great  mobs 
broke  open  and  plundered  the  shops  and  ware- 
houses with  impunity.  So  little  power  remained  to 
the  government  that  it  was  glad  to  buy  them  off 


•      LEGAL-TENDER  CURREXCY  OF  FRANCE,     j^- 

by  the  payment  of  7,000,000  of  francs  ;  a  leader  of 
the  mob  declaring  that  the  plundered  "  merchants 
were  giving  back  to  the  people  what  had  hitherto 
been  robbed  of  them."  The  necessities  of  the 
people  speedily  showed  themselves  in  legislation. 
Maxiimun  laws  were  passed,  making  sales  of  goods 
compulsory,  and  fixing  their  price  in  paper. 

"  This,"  as  von  Sybel  declares,  "  was  the  most  compre- 
hensive attack  on  the  rights  of  property,  as  far  as  our  histor- 
ical knowledge  reaches,  which  was  ever  made  in  Western 
Europe — an  attack  made  in  the  heart  of  a  great  and  civilized 
nation,  and  one  which  was  not  confined  to  the  brains  of  a  few 
idle  dreamers,  but  practically  carried  out  in  all  its  terrible 
consequences.  It  was  made  with  fiery  fanaticism  and  un- 
bridled passion,  and  yet  with  systematic  calculation.  Its 
originators — victorious  at  home  and  abroad— were  perfectly 
free  in  their  deliberations,  and  did  not  adopt  their  measures 
under  the  pressure  of  necessity  or  despair,  but  from  deliberate 
choice.  These  are  facts  of  universal  significance,  on  which 
we  ought  to  fix  our  attention  all  the  more  earnestly  because 
they  have  been  disregarded,  although  they  are  fraught  with 
the  most  important  consequences." 

The  result  of  these  maximum  laws  was,  that 
none  who  could  help  it  would  sell.  The  necessities 
of  life  could  no  longer  be  obtained  ;  the  people  in 
the  large  cities  had  to  be  put  upon  allowance. 
Tickets  were  issued  entitling  the  bearer  to  a 
limited  amount  of  a  few  articles  necessary  to  ex- 
istence. The  period  of  the  real  distribution  of 
property  had  come,  paper  money  having  served  as 
the  instrument  for  confiscating  the  property  of  the 


176    RESUMPTION  AND  THE  STIVER  QUESTION. 

kingdom  by  the  extravagance,  idleness  and  vice 
it  produced,  and  by  rendering  impossible  any  well- 
directed,  successful  industry. 

The  chaos  and  ruin  which  prevailed  on  every 
hand  could  not  stifle  family  affection.  Parents 
sought  to  make  provision  for  their  children,  in 
something  more  valuable  and  permanent  than  gov- 
ernment notes.  To  defeat  impulses  so  natural  a 
law  was  passed  which  forbade  the  purchase  or  ex- 
change of  specie  at  a  rate  higher  than  its  nominal 
value  in  paper,  the  penalty  for  the  ofTense  being 
six  months'  imprisonment  in  irons.  In  the  mean- 
time the  cry  for  more  money  grew  fiercer  than  ever. 
To  meet  it  an  issue  was  made,  in  May,  1793,  equal- 
ing 1,200,000,000  francs.  Immediately  following 
this  issue  a  law  was  passed  imposing  a  forced  loan 
upon  the  rich  of  1,000,000,000  francs.  As  the  notes 
rapidly  sank  in  value  under  issues  which  now  equaled 
4,600,000,000  francs  (a  small  portion  of  which  only 
had  been  taken  in),  Cambon,  a  leading  member  of 
the  Assembly,  devised  a  funding  scheme,  almost 
precisely  similar  to  that  which  has  been  so  often 
proposed  in  the  United  States — that  of  intercon- 
vertibility.  The  holders  of  notes  were  to  convert 
them  into  five  per  cent,  government  bonds ;  to  have 
the  notes,  if  they  required  it,  reissued  to  them. 
This  scheme,  as  might  have  been  expected,  proved 
utterly  futile.  To  check  the  fall  of  the  notes 
1,000,000,000  were   attempted  to  be  called   in    by 


LEGAL-TENDER  CURRENCY  OF  FRANCE,     lyy 

means  of  a  forced  loan.  •  The  first  effect  of  such  a 
reduction  was  to  sustain  for  a  moment  the  value 
of  the  notes;  but  the  effect  was  soon  lost.  In  the 
crisis  the  market-women  of  Paris  made  an  earnest 
appeal  to  the  Assembly  ''  to  pass  laws  to  make 
paper  as  good  as  gold."  In  obedience  to  their  re- 
quest, and  a  pressure  from  other  quarters,  Couthon, 
one  of  the  most  famous  characters  of  the  I^evolu- 
tion,  proposed  and  carried  a  law  which  provided 
that  "  any  person  who  should  sell  an  assignat  at 
less  than  its  nominal  value  should  be  punished  by 
imprisonment  in  chains  for  twenty  years."  This 
was  followed  by  a  law  making  investments  by 
Frenchmen  in  foreign  countries  punishable  with 
death.  As  the  proper  crown  of  all  these  measures, 
a  law  was  passed,  on  the  I5tli  of  August,  1793,  vir- 
tually repudiating  the  interest-bearing  debt  of  the 
nation  by  making  it  payable  in  the  government 
notes. 

In  vain  were  all  these  efforts  to  defeat  the  opera- 
tion of  laws  as  inexorable  as  those  which  regulate 
the  procession  of  the  seasons.  The  nation  was  al- 
ready in  the  throes  of  death  from  the  most  corro- 
sive of  poisons — a  currency  wholly  divested  of  its 
proper  constituent,  capital.  The  very  arm  which 
must  daily  be  stretched  forth  to  sustain  life  was 
palsied.  When  a  person  in  France,  to-day,  offers  a 
bank-note  in  the  purchas«»f)f  a  bale  of  cotton  goods, 
he  offers  in  payment  that  w  hich  perhaps  represents 


178     RESUMPTION  AND  THE  SILVER  QUESTION. 

a  hogshead  of  sugar  or  a  case  of  silk.  The  whole 
operation  really  consists  in  a  mutual  exchange  of 
articles  for  consumption.  Some  one  of  these  stands 
behind  every  note,  and  can  always  be  reached  by 
direct  exchange.  If  it  cannot  be  so  reached,  then 
the  issuer  stands  ready  to  take  in  the  note  by  pay- 
ing gold.  In  1793,  when  a  person  offered  a  govern- 
ment jiote  in  exchange  for  a  bale  of  cotton  goods, 
he  offered  that  which  represented  no  corresponding 
equivalent.  No  consumable  article  stood  behind  it. 
The  consequence  was  that  the  transactions  which 
took  place  had  no  relation  to  things  in  actual  exist- 
ence. Every  one  was  conscious  of  this,  and  sought 
to  escape  the  effect  by  overreaching  his  fellow.  All 
the  springs  of  society  were  tainted  at  the  very 
source.  No  healthy  process  of  any  kind  could  de- 
velop itself  in  order  to  produce  sound  and  useful 
results ;  and  as  none  had  the  courage  to  attack  the 
cause,  all  were  driven  to  invent  excuses  or  apolo- 
gies for  the  result,  as  absurd  and  monstrous  as  the 
evil  itself.  The  currency  destroyed  at  the  same 
moment  alike  the  material,  moral,  and  intellectual 
welfare  of  the  nation. 

Up  to  the  close  of  August,  1793,  the  whole 
amount  of  notes  that  had  been  issued  had  equaled 
4,616,000,000  francs,  of  which  3,776,000,000  were  in 
circulation,  a  little  over  800,000,000  having  been 
taken  in.  At  the  close  *ftf  June,  1794,  the  amount 
in  circulation  rose  to  6,536,000,000  francs.     As  the 


LEGAL-TENDER  CURRENCY  OF  FRANCE,     ijg 

notes  continued  to  decline  in  value,  issue  necessa- 
rily follovyed  issue  in  rapid  succession,  and  in  in- 
creased amounts  to  make  up  for  the  decline,  till  the 
beginning  of  1796,  when  the  amount  reached  45,- 
000.000,000,  of  which  36,000,000,000  ($7,200,000,- 
000)  remained  in  circulation  !  Their  price  had  now 
fallen  so  low  that  it  would  no  longer  pay  the  cost 
of  printing.  A  point  was  at  last  reached,  at  which 
all  the  penalties  imposed — excessive  fines  and  for- 
feitures; twenty  years'  imprisonment  in  chains  ;  and 
even  the  guillotine  itself — ceased  to  exert  any  in- 
fluence whatever.  The  history  of  the  notes  for  the 
two  years,  from  June,  1794,  till  their  fall,  is  sum- 
marized in  what  has  preceded,  although  their  ef- 
fects, from  the  enormous  amounts  issued,  far  tran- 
scended in  intensity  those  of  any  former  period. 
As  government  had  no  other  resource,  and  as  it 
was  felt  that  the  life  of  the  nation  as  a  power  in 
Europe  was  dependent  upon  the  maintenance  of 
its  notes,  it  had  to  be  present  in  almost  every  act 
of  society.  The  contest  was  one  between  unbridled 
despotism,  enacting  laws  wholly  repugnant  to  rea- 
son and  nature,  with  penalties  cruel  in  the  extreme, 
and  enforced  with  remorseless  celerity,  on  the  one 
side  ;  and,  on  the  other,  a  people  supported  by  the 
strongest  instincts  and  passions  of  the  race— a  love 
of  freedom  and  a  determination  to  retain  and  ap- 
propriate in  their  own  way  that  which  they  pos- 
sessed. If  was  a  contest  in  which  both  parties 
were  to  meet  with  overwhelming  defeat  and  dis- 


l8o    liliSUMPTlOX  AND  THE  SILVER  QUESTION. 

aster  ;  for  the  government  could  enforce  the  circu- 
lation of  its  notes  only  at  their  estimated  value,  while 
the  public  could  not  avoid  their  use. 

Historians,  in  attempting  to  account  for  the  ex- 
cesses and  atrocities  of  the  French  Revolution, 
have  strangely  overlooked  the  influence  of  its  cur- 
rency. When  the  vast  amounts  issued  are  consid- 
ered, its  necessary  effect,  in  overturning  every  use- 
ful industry,  and  in  stimulating  every  species  of  ex- 
penditure and  extravagance,  was  quite  enough  to 
produce  all  the  terrible  results  that  followed,  with- 
out the  influence  of  any  of  the  causes  that  have 
usually  been  assigned.  It  was  a  contest  which  not 
only  arrayed  the  people  against  the  government, 
but  turned  the  hand  of  every  man  against  his 
neighbor.  Society  was  a  ship  that  was  wrecked  ; 
the  crew  and  passengers  perishing  alike  in  the  des- 
perate struggle  to  reach  and  appropriate  some  of 
the  fragments  that  were  floating  in  the  wild  waste 
of  waters.  In  such  a  struggle  a  few  only  of  the 
strongest  were  saved.  The  moneyed  classes,  fore- 
seeing the  inevitable  result,  had  methodically  in- 
vested all  the  notes  received  by  them  in  permanent 
forms  of  property,  so  that,  when  the  final  collapse 
came,  the  greater  part  of  the  capital-of  the  nation 
was  in  their  hands,  the  worthless  notes  being  al- 
most wholly  in  those  of  the  poor. 

"  Before  the  end  of  the  year  1795,"  says  von  Sybel,  "  the 
paper  money  was  almost  exclusively  in  the  hands  of  the 
working  classes,  employes,  and  men  of  small  means,  whose 


LEG  A  L-  TENDER  CURRENC  Y  OF  ERA  NCE.     j  g  I 

property  was  not  large  enough  to  invest  in  stores  of  goods  or 
national  lands.  The  financiers  and  men  of  large  means, 
though  they  suffered  terribly,  were  shrewd  enough  to  put 
much  of  their  property  into  objects  of  permanent  value.  The 
working  classes  had  no  such  foresight,  or  skill,  or  means.  On 
them  finally  came  the  great,  crushing  weight  of  the  loss. 
After  the  first  collapse  came  up  the  cries  of  the  starving. 
Roads  and  bridges  were  neglected  ;  manufactures  were  gen- 
erally given  up  in  utter  helplessness.  *  *  *  None  felt  any 
confidence  in  the  future  in  any  respect ;  none  dared  to  make 
any  investment  for  any  length  of  time,  and  it  was  accounted  a 
fcflly  to  curtail  the  pleasures  of  the  moment  to  accumulate  or 
save  for  an  uncertain  future." 

In  1795  a  new  revolution  Avas  inaugurated,  which 
was  in  the  end  to  produce  results  almost  as  strik- 
ing as  those  of  that  of  1789.  The  change  of  pol- 
icy, however,  was  not  immediate ;  a  forced  loan 
was  again  attempted,  but  the  project  failed,  in  conse- 
quence of  which  notes  were  again  resorted  to.  Gov- 
ernment at  last  vigorously  addressed  itself  to  the 
great  subject  in  hand.  It  decreed  that  no  more 
Assienats  should  be  issued,  but  in  their  stead  Man- 
dats,  "  fully  secured,  and  as  good  as  gold."  To  ac- 
complish such  a  result,  choice  public  real  estate 
was  set  apart,  fully  equal  in  value,  it  was  alleged, 
to  that  of  the  new  notes,  and  which  could  be  at 
once  taken  possession  of  by  their  holder  at  a  value 
determined  by  the  actual  rental.  In  order  to  make 
the  Mandats  'as  good  as  gold,"  the  Assignats  in 
circulation  were  to  be  retired  by  a  forced  Id.ui  and 
other  contrivances,  so  that  each  should    be   raised 


1 82     RESUMPTION  AND  THE  SILVER  QUESTION 

to  onc-thirticth  of  the  value  of  gold.  That  being 
accomplished,  Mandats  were  to  take  the  place  of 
Assignats.  The  change  was  precisely  that  at- 
tempted in  the  Revolutionary  currency,  of  this 
country,  and  already  described.  It  turned  out, 
however,  that  the  Mandats  at  once  fell  30  per  cent, 
below  their  nominal  value.  They  continued  to  de- 
cline till  their  price  in  coin  equaled  only  5  per 
cent,  of  their  nominal  value.  In  spite  of  such  re- 
sults, which  were  but  the  expression  of  natural 
laws,  the  hope  and  ingenuity  of  the  people  was  by 
no  means  exhausted.  The  press  and  innumerable 
pamphleteers  came  manfully  to  the  rescue.  The  vast 
superiority  of  Mandats  to  Assignats  was  asserted. 
The  security  for  their  payment  was  far  better,  and 
could  be  far  more  easily  reached.  No  possible  rea- 
son existed  why  they  should  fall  in  value  as  the  As- 
signats had  done.  The  refutation  cam^,  in  the  fall 
of  the  new  notes,  before  the  pamphlets  had  fairly 
issued  from  the  press.  To  re-enforce  their  argu- 
ments it  was  provided  by  law,  that  any  one  who 
should  orally,  or  in  writing,  depreciate  the  new 
notes,  should  for  the  first  offense  pay  a  fine  of  not 
less  than  1,000  francs,  and  for  the  second  should 
be  imprisoned  in  irons  four  years.  It  was  also  pro- 
vided that  any  one  refusing  the  Mandats,  should 
for  the  first  offense,  pay  an  equal  sum ;  for  the  sec- 
ond, ten  times  as  much  ;  and  for  the  third,  should 
be  imprisoned  two  years.  Every  act  of  the  kind, 
instead  of  sustaining  the  price,  only  served  to  pre- 


LEGAL-TENDER  CURRENCY  OF  FRANCE. 


183 


cipltate  their  fall.  The  great  tragedy  was  now  ap- 
proaching an  end.  On  the  i6th  of  July,  1796,  a 
decree  was  passed,  repealing  all  laws  by  which  the 
circulation  of  the  notes  was  sought  to  be  enforced. 
Henceforth  they  were  to  be  dealt  in  only  at  their 
real  or  estimated  value.  Of  the  INIandats,  2,500,- 
000,000  were  put  in  circulation  ;  of  the  Assignats, 
36,000,000,000  remained  in  circulation.  The  repeal 
of  the  laws  enforcing  the  circulation  of  the  notes 
was  but  another  word  for  the  repudiation  of  the 
whole,  as  effectually  as  was  the  money  of  the  Con- 
federate States  repudiated  upon  the  collapse  of  the 
Rebellion.  The  race,  at  the  South,  still  existed  ; 
but  nearly  all  its  accumulation,  and  its  commercial 
and  industrial  institutions,  were  swept  away.  So 
with  France.  The  great  cause  of  the  infinite  ruin 
and  demoralization  which  had  been  suffered  being 
removed,  society,  destitute,  but  not  wholly  disheart- 
ened, set  resolutely  to  work  to  repair  the  errors, 
follies,  and  waste  of  the  past.  No  sooner  had  the 
system  of  paper  money  fallen  than  specie  began 
to  reappear,  as  it  did  upon  the  fall  of  the  Rev- 
olutionary currency  of  the  United  States;  at  first 
in  small  amounts,  but  gradually  in  sums  sufficient 
to  meet  all  the  wants  of  commerce  and  trade.  The 
lesson  has  never  been  forgotten,  and  will  never  be 
forgotten,  in  France.  From  the  time  of  the  fall  of 
the  paper  money  issued  in  her  great  revolution, 
that  nation  has  displayed  a  prudence,  wisdom,  and 
capacity  in  her  monetary  affairs,  that  has  rendered 


l84    KESUMPTION  AND  THE  SILVER  QUESTION. 

her  a  wonder  among  the  nations.  If  she  has  com- 
mitted any  error,  it  is  in  too  great  accumulations 
of  specie,  in  order  to  render  impossible  the  repeti- 
tion of  her  great  disaster.* 


SECOND    ISSUE    OF    LEGAL-TENDER 
CURRENCY     OF     THE     UNITED     STATES. 

Such,  as  they  appear  in  history,  are  the  nature 
and  effects  of  currencies  of  government  notes, 
whether  issued  by  the  coarse  despotisms  of  Asia,  by 
the  most  refined  and  prudent  nation  of  Europe,  or, 
in  its  struggle  for  Independence,  by  the  "  Model 
Republic,  the  light  and  hope  of  the  nations."  We 
now  have  to  add  a  second  example  of  our  own.  In 
both  instances,  as  well  as  in  France,  the  same  ne- 
cessity was  pleaded  and  deplored — "  revolution  " 
— the  terrible  examples  of  the  past  being  full  in 
view.  The  Secretary  of  the  Treasury  at  the  time, 
Mr.  Chase,  could  by  lio  means  recommend  a  mea- 
sure so  fraught  with  danger  and  disaster. 

"  The  temptation,"  he  said  in  his  annual  report  for  1861,  "es- 
pecially great  in  times  of  pressure  and  danger,  to  issue  notes 
without  adequate  provision  for  redemption  ;  the  ever-present 
liability  of  being  called  upon  for  redemption  beyond  means, 

*  The  writer  wishes  to  acknowledge  the  great  assistance,  in  the 
preparation  of  the  article  upon  the  French  Legal-Tender  Currency, 
derived  from  the  very  valuable  paper,  entitled  "  Paper-Money  Infla- 
tion in  France,"  by  the  Hon.  A.  D,  White,  President  of  Cornell 
University. 


SECOND  ISSUE  OF  LEGAL-TENDERS. 


185 


however  carefully  provided  and  manaj^ed  ;  the  hazard  of 
panics  precipitating  demands  for  coin,  concentrated  on  a  few 
points  and  a  single  fund  ;  the  risk  of  a  depreciated,  depreci- 
ating, and  finally  worthless  paper  money  ;  the  immeasurable 
evils  of  a  dishonored  public  faith  and  national  bankruptcy — 
all  these  are  the  possible  consequences  of  a  system  of  govern- 
ment circulation.  *  *  *  In  the  judgment  of  the  Secretary 
these  possible  disasters  so  far  outweigh  the  probable  benefits 
of  the  plan,  that  he  feels  himself  constrained  to  forbear  re- 
commending its  adoption." 

Mr.  Sherman,  the  present  Secretary  of  the  Trea- 
sury, equally  deplored  the  cruel  necessity  upon  the 
nation.  The  currency  to  be  used,  was,  however, 
to  be  merely  a  temporary  expedient,  easily  man- 
aged and  soon  to  give  way  to  a  juster  and  more 
adequate  system  of  raising  money. 

"  I  know  very  well,"  he  said  in  the  speech  already  referred 
to,  in  support  of  the  issue,  "  that  if  you  continue  this  issue  of 
demand  notes  by  others,  you  will  depreciate  and  break  down 
the  whole  system.  I  do  not  believe  the  issue  of  $150,000,000 
will  do  any  harm.  But  if  you  continue  to  issue  other  sums 
you  will  at  once  depreciate  the  credit  of  these  demand  notes 
and  destroy  their  value. 

"  After  all,  Mr.  President,  this  is  a  MERE  temporary  ex- 
pedient. //  is  manifest  that  we  must  rely  upon  some  other 
source  of  obtaining  money.  We  dare  not  repeat  this  experi- 
ment a  second  time.  If  we  do,  we  enter  upon  the  same  course 
that  was  followed  in  the  French  Revolution,  and  also  by  our 
American  ancestors.  *  *  *  Do  you  tell  me  that  this  will 
create  an  inflation  of  prices  ?  I  do  not  thmk  so.  If  you 
should  follow  this  issue  by  another,  you  might  create  a  dis- 
turbance in  your  financial  operations  ;  but  I  think  this  will 
not." 


1 86    RESUMPTION  AND  THE  SILVER  QUESTION. 

Mr.  Sherman's  argument,  from  which  we  have 
room  only  for  the  preceding  extracts,  summarized 
all  that  were  made  in  favor  of  the  measure.  The 
necessity  was  overpowering ;  the  amount  was  to  be 
very  small,  and  never  to  exceed  a  certain  limit ;  the 
measure  was  a  mere  temporary  expedient,  which, 
considering  the  limited  sum  to  be  issued,  could 
work  no  serious  harm ;  the  vast  wealth  of  the 
country  would  enable  it,  on  the  collapse  of  the  re- 
bellion, easily  to  retire  the  notes — arguments  a 
thousand  times  repeated  on  similar  occasions,  and 
always  effectual  with  weak  and  irresolute  natures  in 
the  face  of  a  great  emergency.  In  vain  were  op- 
posed considerations  drawn  alike  from  reason  and 
the  examples  of  the  past;  an  issue  of  $150,000,000 
of  notes  was  voted,  but  only  by  a  small  majority  in 
either  House.  The  first  fatal  step  taken,  the  next 
followed  by  irresistible  necessity.  Within  a  few 
months  $150,000,000  more  were  called  for.  Issue 
followed  issue,  till  the  whole  amount,  including  in- 
terest-bearing legal-tender  notes,  reached  nearly 
$800,000,000 ! 

We  do  not  propose  to  enter  at  length  upon  the 
question  of  the  expediency  of  the  issue  of  the  gov- 
ernment notes,  although  we  believe  it  to  be  demon- 
strable that  the  resort  to  them  was  not  only  wholly 
unnecessary,  but  that  they  were  throughout  the 
most  formidable  obstacle  encountered  in  the  prose- 
cution of  the  war.    The  disastrous  consequences  of 


SECO.YD  ISSUE  OF  LEGAL-TENDERS.  187 

their  issue  we  are  still  laboring  in  vain  to  over- 
come. The  intense  spirit  of  patriotism  which  was 
aroused,  the  alacrity  with  which  the  moneyed  classes 
and  the  banks  came  to  the  support  of  the  gov- 
ernment, and  the  great  and  constantly  increasing 
strength  of  the  banks  fully  proved  that  every 
man  and  every  dollar  of  capital  of  the  countr>'  that 
could  be  spared  could  have  been  readily  reached 
by  the  currency  then  in  existence,  and  of  the  value 
of  coin  ;  so  that  when  the  nation  came  triumph- 
antly out  of  the  struggle  it  could  have  immediately 
entered  upon  a  career  of  unwonted  prosperity,  its 
monetary  system  being  in  a  sound  and  healthy  con- 
dition, with  the  great  disturbing  element  of  the 
past,  slavery,  wholly  removed.  To  enable  the  gov- 
ernment to  avail  itself  of  the  capital  of  the  country 
precisely  as  the  people  had  availed  themselves  of 
it,  the  law  creating  the  Independent  Treasury  was 
so  modified  as  to  allow  the  use,  in  the  place  of 
coin,  of  the  notes  and  credits  of  the  banks.  Their 
capital  was  a  mere  fraction  of  that  of  the  whole 
country',  or  compared  with  that  which  the  emer- 
gency demanded.  They  should  have  been  upheld 
for  a  double  purpose — to  enable  them  to  serve 
more  effectually  as  the  agents  and  brokers  of  the 
government  in  the  negotiation  of  its  loans,  and  to 
sustain,  in  a  sound  and  healthy  condition,  the  in- 
dustries of  the  country.  Not  a  dollar  of  their 
capital  should  have  been  touched  that  could  not 
have  been  immediately  replaced.     Instead  of  pur- 


1 88     RESUMPTION  AND  THE  SILVER  QUESTION. 

suing  the  policy  of  sustaining  them — a  policy  the 
wisdom  cf  which  was  so  obvious,  and  which  would 
have  enabled  the  government  to  reach,  at  the  par 
of  coin,  every  dollar  of  the  capital  of  the  country 
exactly  in  the  form  required — food,  clothing,  muni- 
tions, transportation,  etc.,  etc. — the  $150,000,000 
loan  negotiated  with  the  banks  at  the  outbreak  of 
the  war  was  transferred  from  them  to  the  treasury, 
to  be  paid  out  in  kind.  If,  instead  of  drawing  the 
coin,  the  government  had  made  its  payments  by 
requisitions — by  checks  upon  the  banks  of  the 
three  great  cities  which  made  the  loan,  allowing 
the  holders  of  such  checks  to  draw  them  in  the 
form  that  best  suited  their  convenience,  not  one 
dollar  in  fifty  would  have  been  drawn  in  coin. 
The  checks  would  have  been  the  instruments 
for  reaching  a  corresponding  amount  of  mer- 
chandise, or  service,  and  would  have  been  dis- 
charged by  mutual  offset  at  the  Clearing  Houses 
precisely  as  those  drawn  in  the  ordinary  course  of 
trade  are  discharged.  In  such  cases  ho  more  gold 
would  have  been  drawn  in  the  operations  of  the 
government  than  is  drawn  in  those  of  merchants 
corresponding  in  amount.  No  sooner  did  hostili- 
ties break  out  than  the  flow  of  specie,  for  the  .first 
time  since  the  discovery  of  gold  in  California, 
turned,  in  great  volume,  toward  this  country.  This 
inward  flow,  but  for  the  government  notes,  would 
have  continued  from  the  economics  that  would 
have  been   practised  by  the  people  through    the 


SECOND  ISSUE  OF  LEGAL-TENDERS.  189 

whole  period  of  the  war,  increasing  in  like  ratio  the 
reserves  of  the  banks,  and  increasing  in  an  equal 
degree  their  power  to  sustain  both  government  and 
people.  Instead  of  using  the  banks,  as  the  public 
use  them,  for  the  purpose  of  reaching  that  which 
their  bills  represent,  the  government  attacked  them 
in  their  most  vital  point — their  reserves.  These 
drawn,  they  necessarily  suspended.  Their  reserves 
when  drawn  were  paid  out  in  the  purchase  of  that 
which  their  bills  represented,  and  which  could  have 
been  reached  by  their  notes  without  the  use  of  a 
dollar  of  coin.  Never  was  there  a  public  measure 
of  this  country  so  fatal  in  its  consequences  and  at 
the  same  time  so  wholly  unnecessary.  The  natural 
and  obvious  would  have  been  the  far  more  conve- 
nient method,  even  for  the  utilization  of  the  $150,- 
000,000,  than  that  resorted  to.  But  sinister  councils 
prevailed.  The  banks  being  driven'into  suspension 
by  the  act  of  the  government,  no  alternative,  it  was 
alleged,  wa§  left  it,  but  to  issue  its  own  notes,  which, 
having  no  proper  constituent,  fell  speedily  and  enor- 
mously in  price,  increasing  the  present  and  future 
burdens  of  the  government  and  the  people  in  like  ra- 
tio. They  not  only  instantly  turned  the  golden  tide 
away  from  the  country,  but  presently  sent  out  of  it  all 
the  accumulations  of  the"  past,  as  well  as  the  prod- 
ucts of  our  mines,  then  the  wonder  of  the  world. 
The  notes  more  than  doubled  the  cost  of  the  war, 
and  from  their  demoralizing  effect  greatly  pro- 
longed  it.     But  this  was  by  no  means  all.     The 


IQO    RESUMPTION  AND   THE  SILVER  QUESTION. 

banks,  released  from  the  only  competent  check  upon 
their  issues — the  obligation  to  pay  specie — imme- 
diately increased  them  in  ratio  to  those  of  the  gov- 
ernment. A  wild  carnival  of  extravagance  and  ex- 
penditure followed,  only  rivaled  by  that  produced 
by  the  Revolutionary  currency  of  this  country  or 
by  the  Assignats  of  France.  For  sixteen  years  has 
the  poison  been  at  work  upon  the  frame  of  a  great 
nation,  which  would  have  succumbed  long  ago  had 
it  not  been  in  the  vigor  of  its  prime  and  possessed  of 
enormous  strength.  If  it  still  survives,  it  is  stricken 
with  a  palsy,  fatal  alike  to  all  life  and  hope ;  while 
the  restoration  of  its  monetary  system  yet  remains 
a  problem  far  more  difficult  of  solution  than  was 
the  suppression  of  the  mighty  rebellion. 

Upon  the  return  of  peace,  the  traditions,  at  least, 
of  the  past,  surt^ived.  No  one  for  a  moment  enter- 
tained the  thought  that  the  greenbacks  were  to 
become  the  permanent  currency  of  the  country. 
The  nation  manfully,  without  a  moment's  delay, 
addressed  itself  to  the  work  before  it.  The  reduc-" 
tion  which  immediately  followed  was,  fortunate- 
ly, in  great  part  of  the  currency.  Had  the  same 
spirit  continued,  the  nation  would  have  been  long 
ago  rid  of  an  evil  which,  after  working  incalculable 
mischief,  seems  now  to  defy  all  effort  to  remove. 
The  following  statement  will  show  the  amount  of 
the  public  debt  as  it  stood  on  the  first  of  Sep- 
tember, 1865,  when  it  had  reached  its  maximum: 


SECOND  ISSUE  OF  LEGAL-TENDERS.  jqi- 

Funded  debt $1,109,568,000 

Matured   '.' i ,  503,000 

Temporar)'  loan 107,149,000 

Certificates  of  indebtedness '. ..  .85,093,000 

Five  per  cent,  legal-tender  notes 33,954>ooo 

Compound  interest  legal-tender  notes 217,024,000     ' 

U.  S.  7.30  notes 830,000,000 

U.  S.  legal-tender  notes 432. 161,000 

Fractional  currency 26,345,000 

Suspended  requisitions    2,111,000 

Total $2,845,908,000 

The  amount  of  the  public  debt  of  the  United 
States  for  each  year,  from  1861  to  1865  inclusive,  is 
shown  in  the  following  statement : 

Years  ending  Amounts. 

June  30,  1861 .$90,580,874 

1862 524,176,412 

1863 1,119,772,139 

1864 1,815,784,371 

"         1865 2,680,647,870 

August  31,  1865 2,845,908,000 

In  his  Annual  Report,  December,  1865,  Mr. 
McCulloch,  tiicn  Secretary  of  the  Treasury,  set 
forth  with  great  earnestness  and  convincing  force, 
the  vast  evils  that  had  already  resulted  from  the  use 
of  a  currency  of  government  notes.  Tlicy  had,  he 
urged,  fulfilled  their  object,  the  suppression  of  the 
rebellion  ;  they  were  only  resorted  to  as  a  tempo- 
rary expedient ;  their  constitutionality  was  only  jus- 
tified by  a  supreme  necessity  which  no  longer  ex- 
isted.    To  maintain   them   in  circulation    without 


1^2     RESUMPTION  AND  THE  SILVER  QUESTION. 

provision  for  their  payment,  was,  he  declared,  an 
act  of  virtual  repudiation,  which,  if  persisted  in, 
would  eventually  be  turned  against  the  integrity  of 
the  national  debt  itself.  The  House  responded 
with  alacrity  to  his  appeal,  and  on  the  i8th  of  De- 
cember, 1865,  resolved  that: 

"  This  House  cordially  concurs  in  the  views  of  the  Secre- 
tary of  the  Treasury,  in  relation  to  the  necessity  of  contracting 
the  circulation  with  a  view  to  an  early  resumption  of  specie 
payments  ;  and  we  hereby  pledge  co-operative  action  to  this 
end  as  speedily  as  practicable." 

The  preceding  resolution  passed  by  a  vote  of  144 
in  favor,  to  6  opposed.  In  pursuance  of  its  pledge, 
Congress,  on  the  12th  of  April,  1866,  passed  an 
act  providing  for  the  retirement  of  $10,000,000  of 
United  States  notes,  within  a  period  of  six  months  ; 
and  for  their  retirement,  at  the  expiration  of  such  pe- 
riod, at  a  rate  not  exceeding  $4,000,000  each  month  ;' 
the  amount  of  notes  then  outstanding  equaling 
$422,000,000.  In  obedience  to  this  act,  the  Secre- 
tary immediately  entered  upon  and  continued  the 
retirement  of  the  notes,  till  their  amount  was  re- 
duced to  $356,000,000.  Their  further  retirement 
was  then  suspended  by  an  act  passed  on  the  4th 
day  of  February,  1868,  of  which  the  following  is  a 
copy: 

"  That  from  and  after  the  passage  of  this  act,  the  author- 
ity of  the  Secretary  of  the  Treasury  to  make  any  reduction  of 
the  currency  by  retiring  or  canceling  United  States  notes, 
shall  be,  and  is  hereby  suspended;  but  nothing  herein  con- 


SECO.VD  ISSUE  OF  LEGAL-TENDERS.  193 

tained  shall  prevent  the  cancellation  and  destruction  of  muti- 
lated United  States  notes,  and  the  replacing  of  the  same  with 
notes  of  the  same  character  and  amount." 

The  act  of  1868  did  not,  as  will  be  seen,  repeal, 
but  only  suspended,  the  act  of  1866.  The  retire- 
ment of  the  notes,  it  was  urged  by  the  mercantile 
and  manufacturing  classes,  was  producing  a  strin- 
gency in  the  money  market,  and  should  be  sus- 
pended. The  peculiar  phraseology  used  was  inten- 
tional. When  the  nation  proceeded  again  with  the 
retirement  of  its  notes,  it  would  not,  it  was  said,  have 
to  enact  a  new  bill,  only  repeal  the  one  just  passed. 
The  principal  object  of  the  act,  however,  was  to 
take  away  from  the  discretion  of  the  Secretary,  and 
vest  in  Congress  itself,  the  direction  of  a  matter  of 
such  transcendent  importance  as  the  regulation  of 
the  currency.  There  was  not  a  suggestion  at  the 
time  of  the  abandonment  of  a  policy  so  definitely 
entered  upon,  or  of  the  establishment  of  irredeem- 
able government  notes  as  the  permanent  currency 
of  the  country.  That  there  was  no  such  purpose 
in  view  is  fully  shown  by  the  act  of  March  i8th, 
1869,  usually  termed  "  the  Act  for  the  Mainte- 
nance of  the  Public  Credit,"  of  which  the  following 
is  a  copy  : 

"  IJe  it  enacted  by  the  Senate  and  House  of  Representa- 
tives of  the  Unitofl  States  of  America  in  Congress  assembled, 
that  in  order  to  remove  any  douI)t  as  to  the  purpose  of  the 
government  to  discharge  all  just  obligations  to  tlir  public 
creditors,  and  to  settle  conflicting  questions  and  inlcrpreta- 

9 


IC)4     RESUMPTION  AND  THE  SILVER  QUESTION. 

tions  of  llic  laws,  by  virtue  of  which  such  oblici-ations  have 
been  contracted,  it  is  hereby  provided  and  declared,  that  the 
faith  of  the  United  States  is  solemnly  pledged  to  the  payment 
in  coin,  or  its  equivalent,  of  all  tlie  obligations  of  the  United 
States,  not  bearing  interest,  known  as  United  States 
NOTES;  and  all  the  interest-bearing  obligations  of  the  United 
States,  except  in  cases  where  the  law  authorizing  the  issue  of 
any  such  obligations,  has  expressly  provided  that  the  same 
may  be  paid  in  lawful  money,  or  other  currency  than  gold 
and  silver.  But  none  of  said  interest-bearing  obligations  not 
already  due,  shall  be  redeemed  or  paid  before  maturity,  un- 
less at  such  time  United  States  notes  shall  be  convertible  into 
coin,  at  the  option  of  the  holder  ;  or,  unless  at  such  time  bonds 
of  the  United  States  bearing  a  lower  rate  of  interest  than  the 
bonds  to  be  redeemed  can  be  sold  at  par  in  coin. 

"And  the  United  States  also  solemnly  pledges  its  faith  to 
make  provision,  at  the  earliest  practicable  period,  for  the  re- 
demption of  the  United  States  notes  in  coin." 

This  measure  passed  both  Houses  by  large  major- 
ities ;  the  vote  in  the  House  being  Ii8  in  favor,  to 
57  against.  There  was  no  pretense  from  any  quar- 
ter that  it  was  urged  in  favor  of  any  class.  As  the 
bonds  had  been  purchased  by  means  of  the  notes, 
it  was  suggested,  as  was  natural,  that  they  should  be 
paid  in  them.  The  reply  was  as  obvious  as  it  was 
conclusive.  Payment  in  the  notes  would  be  simply 
an  exchange  of  an  interest-bearing  for  a  non-intcr- 
est-bearing  obligation  of  the  government.  Pay- 
ment in  this  mode  would  greatly  reduce  the 
present  value  of  the  security,  and  if  the  notes 
were  to  be  a  permanent  currency,  would  be  no 
payment  at  all ;  it  would  be  repudiation.     To  make 


SECOND  ISSUE  OF  LEGAL-TENDERS.  195 

the  bonds  payable  in  the  notes  would  be  to  make 
the  latter  a  permanent  currency.  Nothing  was 
farther  from  the  mind  of  Congress  than  such  a 
proposition  as  this.  The  bonds,  at  the  time,  were 
the  common  property  of  the  world  ;  their  payment 
and  that  of  their  interest  must  be  made  in  the 
money  of  the  world.  Had  it  been  announced,  at 
the  time  the  bonds  were  put  upon  the  market,  that 
they  would  be  paid  in  non-interest-bearing  notes, 
not  a  dollar  of  them  could  have  been  sold.  Con- 
gress cannot  now,  it  was  urged,  take  a  ground  that 
it  could  not  have  taken  when  the  bonds  were  sold 
and  the  proper  consideration  received  therefor. 

The  great  mistake  of  the  act  of  1869,  was  the 
pledge  given  that  the  notes  themselves  should  be 
paid  at  their  par  value  in  coin.  Congress  proceed- 
ed upon  the  idea  that  these  having  a  form  similar 
to  those  of  banks  should  like  bank  notes  be  dis- 
charged in  coin  at  their  nominal  amount ;  for- 
getting that  bank  notes  are  always  issued  upon  a 
consideration  equaling,  or  assuming  to  equal,  their 
nominal  value  in  coin.  Instead  of  such  consider- 
ations, the  government  notes  were  a  forced  loan, 
depending  for  their  circulation  as  money  upon  the 
legal-tender  clause.  When  issued,  their  price  in 
gold  did  not  equal  two-thirds  of  their  nominal 
value.  When  government  came  to  deal  with  the 
matter  of  their  retirement,  the  only  thing  to  be 
done  was  to  make  provision    for  funtliiig  them  at 


ig6    RESUMPTION  AND  THE  SILVER  QUESTION. 

their  value  at  the  time,  discharging  them,  after  a 
certain  day,  of  their  legal-tender  attribute.  The 
proper  mode  of  their  retirement  will  be  more  fully 
considered  in  subsequent  parts  of  this  work. 

In  the  panic  of  1873  the  Secretary  of  the  Trea- 
sury, for  the  purpose  of  relieving  a  great  pressure  in 
the  money  market,  reissued,  in  the  purchase  of 
bonds  and  for  other  purposes,  about  $26,000,000  of 
notes  that  had  been  taken  in  under  Mr.  McCul- 
loch's  administration,  increasing  the  amount  out- 
standing to  $382,000,000.  This  act  was  believed  to 
be  without  warrant  in  law,  and  received  the  severest 
condemnation.  The  reissue  of  the  notes,  however, 
greatly  strengthened  the  party  of  inflation,  in  con- 
sequence of  which  an  attempt  was  made  to  raise 
their  amount  to  $400,000,000,  the  alleged  reason 
for  their  issue  being  the  retirement  of  the  three 
per  cent,  certificates,  which  had  been  held  by  the 
banks  as  a  part  of  their  reserves,  and  which  were 
about  to  be  paid  off,  the  notes  to  be  issued  to  take 
their  place.  This  bill  for  such  purpose  promptly 
received  the  veto  of  the  President,  who  was  sus- 
tained by  large  majorities  in  both  Houses.  The 
veto  again  turned  the  tide  strongly  in  favor  of  the 
retirement  of  the  notes,  and  on  the  14th  of  Janu- 
ary, 1875,  Congress  passed  an  act  which,  among 
other  things,  provided  that     ' 

"On  and  after  the  ist  day  of  January,  A.D.  1879,  the 
Secretary  of  the  Treasury  shall  redeem  in  coin  the  United 
States  legal  tender  notes  then  outstanding,  on  their  presenta- 


SECOND  ISSUE  OF  LEGAL-TENDERS. 


197 


tion  for  redemption  at  the  office  of  the  Assistant  Treasurer  of 
the  United  States,  in  the  city  of  New  York,  in  sums  of  not 
less  than  $50.  And  to  enable  the  Secretary  of  the  Treasury 
to  prepare  and  provide  for  the  redemption  in  this  act  autlior- 
ized  or  required,  he  is  authorized  to  use  any  surplus  reve- 
nues from  time  to  time  in  the  treasury  not  otherwise  appro- 
priated, and  to  issue,  sell,  and  dispose  of,  at  not  less  than  par 
in  coin,  either  of  the  description  of  bonds  (4,  4J,  and  5  per 
cents.)  of  the  United  States  described  in  the  act  of  Congress, 
approved  July  14,  1870,  entitled  'An  act  to  authorize  the  re- 
funding of  the  National  Debt, 'with  like  qualities,  privileges,  and 
exemptions,  to  the  extent  necessary  to  carry  this  act  into  effect, 
and  to  use  the  proceeds  thereof  for  the  purposes  aforesaid." 

It  is  under  the  provisions  of  this  act  that  the 
Secretary  of  the  Treasury  now  proposes  to  resume. 

The  capital  defect  of  the  acts  of  1866  and  1875 
was  the  want  of  any  adequate  plan  of  resumption. 
In  1866,  the  business  of  the  country  was  adjusted  to 
a  currency  enormously  inflated.  On  the  first  day  of 
January,  1861,  the  notes  and  deposits  of  the  banks, 
then  upon  a  specie  basis  and  in  a  sound  condition, 
equaled  $45g,234,ooo,made  up  of  $202,005,000  of 
notes  and  $257,239,000  of  deposits.  On  the  first 
day  of  January,  1866,  five  years  after,  and  only  a 
few  months  preceding  the  passage  of  the  bill  for 
the  retirement  of  the  government  notes,  the  cur- 
rency in  circulation  equaled  $1,418,572,000,  made 
up  as  follows : 

Notes  of  the  National  and  State  Banks $282,687,000 

Deposits  in  the  National  Hanks 563,885,000 

Deposits  in  State  Hanks 150,000,000 

Legal  Tender  notes 422,000,000 

Total $1,418,572,000 


1 98     liESUMP TION  A ND  THE  SIL  VER  Q UESTION. 

There  were  at  the  same  time  outstanding  $159,- 
912,000  of  compound-interest  notes   not    included 
in  the  preceding  statement.     The  increase  of  the 
currency  of  the  country  within  the  period  named 
equaled  $959,338,000,  not  including  interest-bear- 
ing notes ;  the  rate  of  increase  exceeding  two  hun- 
dred per  cent.     At  the  same  time,  one-third  of  the 
country  was  almost  wholly  without  ^  currency  of 
any  kind.     When  the  act  for  the  retirement  of  the 
government  notes  was  passed,  the  amount  of  cur- 
rency required  for  the  operations  of  the  country 
could  not  have  greatly  exceeded  that  in  circulation 
in  1 861.     A  return  to  specie  payment  at  that  time 
would  have    required    the  retirement  of  currency 
equaling  at  least   $600,000,000.     There   could   not 
have  been  so   large  an   amount   of  capital   in   the 
cauntry  to  be  symbolized  at   the  close  as  at  the 
outbreak  of  the  rebellion.     When  a  contraction  of 
the    currency  is    inevitable,    contraction    of   prices 
and  of  all  industries  and  enterprises  is  equally  in- 
evitable.     The  act  of   1866  consequently  had  the 
effect  to  put  the  country  upon  the  rack  for  a  period 
of  at  least  nine  years,  during  which  there  was  to  be 
a   steady  retrocession   in   everything  like   the   ap- 
parent   results    of    real    prosperity.       During   that 
whole  period  the  notes  were  still  to  be  legal  tender, 
at  the  same  time  decreasing  in  amount.     So  long 
as  they  remained  legal  tender,  the  banks,  at  least, 
would  make  no  provision  for  resumption.     A  dead 
lock  was  inevitable,  with  no  adequate  provision  for 


SECOND  ISSUE  OF  LEGAL-TENDERS.  iqq 

a  currency  suited  to  the  wants  of  "production  and 
trade.  Standing  alone  on  the  statute  book,  no 
provision  could  have  been  more  absurd,  and  it  was 
swept  away  by  the  first  adverse  breeze.  , 

•  The  amount  of  paper  money,  per  head  of  popu- 
lation, in  the  United  States  in  i860 — a  year  of  re- 
markable activity  and  prosperity — equaled  fourteen 
dollars.  In  1866,  five  years  thereafter,  it  had  in- 
creased to  forty-one  dollars  per  head,  an  amount 
nearly  three  times  greater.  By  far  the  larger  part 
of  this  increase  was  pure  inflation.  The  conse- 
quences were  the  tremendous  speculative  move- 
ments which  followed,  and  which  resulted,  among 
other  things,  in  the  construction,  within  a  very  few 
years,  of  over  40,000  miles  of  railroad,  in  which, 
within  a  period  of  ten  years,  $1,500,000,000  were 
unproductively  expended.  The  depression  which 
followed  was  but  the  natural  reaction  of  the  pre« 
vious  ill-directed  and  exhausting  activity.  The 
thing  of  all  others  which  we  have  now  in  too  great 
abundance  is  our  paper  money.  Its  holders  dare 
not  invest  it  in  any  productive  enterprise,  pre- 
ferring to  put  it  into  government  bonds,  bearing 
the  unprccedentedly  low  rate  of  interest  of  four  per 
cent.  It  is  this  excess  of  paper  money  that  is  to- 
day eating  up  the  means  of  the  great  mass  of  the 
people.  It  is  not  capital  put  to  any  productive 
use.  It  still  exacts,  as  if  it  were  capital,  interest  on 
its  use.  What  wickedness,  by  increasing  its  amount, 


2CXD    RESUMPTION  AND  THE  SILVER  QUESTION. 

to  add  still  further  to  its  power  to  exhaust  and  con- 
sume! 

•  The  act  of  1875  was  equally  faulty  with  that  of 
1866  in  not  providing  an  adequate  method  for  the 
retirement  of  the  notes.  The  more  alarming  fea- 
ture about  it  was  its  indication  of  the  tremendous 
revolution  that  had  taken  place  in  public  opinion 
in  reference  to  their  character.  They  were  no 
longer  to  be  retired  as  a  currency  radically  vicious, 
and  resorted  to  only  as  a  temporary  expedient,  but 
were  to  be  permanently  maintained  in  circulation  as 
the  basis  of  all  other  currencies,  supported  by  an 
amount  of  coin  assumed  to  be  sufificient  to  main- 
tain them  at  par.  The  act  of  1875,  consequently, 
instead  of  being  an  act  for  the  retirement  of  the 
notes,  was  only  an  act  placing  the  country  per- 
manently on  the  basis  of  irredeemable  government 
currency.  All  subsequent  legislation  has  only 
confirmed  the  effect  of  this  act.  The  act  of  1866 
contemplated  the  retirement,  by  payment,  of  the 
notes;  that  of  1875,  their  maintenance  in  circula- 
tion, but  at  the  par  of  coin  by  an  adequate  pro- 
vision of  the  latter.  The  only  problem  now  left 
for  decision  was  the  amount.  In  casting  about 
them,  the  government  officials  saw  that  banks 
maintained  specie  payment  by  a  provision  in  coin 
equaling,  say,  33}^  per  cent,  of  their  liabilities,  and 
they  fixed  upon  that  as  the  ratio  to  be  provided 
to  maintain   the  government  notes  at  the  p^  of 


SECOND  ISSUE  OF  LEGAL-TENDERS.         2OI 

coin,  wholly  overlooking   the  fact    that    it    is    not 
the  coin  which   the  banks  hold  that  retires  their 
liabilities,  but  their  bills  receivable  ;  their  coin  being 
held  to  take  in  such  as  are  not  returned  by  their 
bills,  and  to   meet  contingencies  or  extraordinary 
calls    to    which    they    are    liable.      Their   reserves 
are  held  for  precisely  the  same  object  that  the  re- 
serves of  merchants   are    held.       So    long   as    the 
former  conduct  their  business  properly — that  is,  so 
long  as  they  discount  only  such  paper  as  represents 
real  transactions  in   consumable  merchandise,  and 
which   has  a  short   time  to   run — no   considerable 
portion  of  their  reserves  will  be  drawn  ;    perhaps 
not  one  per  cent,  of  the  amount  of  their  issues.   As 
already  remarked,  it  is  no  part  of  the  object  of  a 
bank  to  lend  coin — this  can  be  loaned  as  well  with- 
out as  with  a  bank  ;  but  to  symbolize  merchandise 
in   the  hands  of  the  public.     In  its  operations  the 
value  of  the  thing  symbolized  must  always  equal 
that   of  the   symbol,  or  the    bank  makes  a  corre- 
sponding loss  ;   or  is  to  an  equal  extent  a  disturbing 
element  or  force  in  production  and  trade.     If  gov- 
ernment would,  like  banks,  issue  a  convertible  cur- 
rency, the  thing  it  symbolizes  must  equal  the  sym- 
bol in  value.     As  it  does  not  attempt  to  symbolize 
merchandise  in  the  hands  of  the  public,  only  coin 
in  its  own  possession,  the  amount  of  the  coin  must 
equal  its  currency,  in  order  to  maintain  the  latter 
at  par.     In   other  words,  government,  if  it  W£)uld 
turn  banker  and  issue  a  convertible  currency,  must 
9* 


202     RESUMPTION  AND   THE  SILVER  QUESTION. 

provide  the  proper  constituent,  lodged  either  in  the 
hands  of  the  public,  or  in  its  own  vaults. 

The  present  legal-tender  currency  being  held 
to  be  well  issued,  the  only  question  dividing  the 
country  is  the  amount;  the  conservative  wing  in- 
sisting that  the  present  amount  is  the  proper  limit, 
with  partial  provision  for  its  conversion  into  coin, 
to  maintain  it  at  par;  the  radical  wing  insisting 
upon  an  unlimited  issue,  or  an  issue, at  least  equal- 
insr  the  amount  of  the  national  debt,  with  no 
provision  for  conversion  into  coin..  No  one  has  a 
better  right  to  speak  for  the  conservative  wing  than 
the  Hon.  Mr.  Morrill,  Senator  from  Vermont,  Chair- 
man of  the  Committee  on  Finance  in  the  'Senate, 
and  for  many  years  Chairman  of  the  Committee  of 
Ways  and  Means  of  the  House.  In  a  speech  deliv- 
ered in  his  place  on  the  2ist  of  May,  1878,  he  said : 

"  The  contraction  of  paper  money  hitherto  has  been  almost 
wholly  imaginary,  and  will  surely  have  lost  its  terrors  when 
contraction,  real  or  fanciful,  wholly  disappears  in  expatision, 
especially  when  it  shall  be  seen  that  all  the  dykes  are  broken 
down,  and  both  gold  and  silver,  long  pent  up,  find  an  unre- 
stricted outlet  to  fertilize  every  part  of  our  country.  *  *  * 
Let  us  hail  the  resumption  now  imminent  as  an  event,  how- 
ever brought  about,  that  may  quicken  the  pulse  of  the  nation 
and  start  us  once  more  on  the  highway  of  national  pros- 
perity. *  *  *  The  mere  fractional  premium  now  remain- 
ing on  gold  is  likely  soon  to  disappear,  unless  that  result  is 
thwarted  by  a  rash  attempt  to  do  by  legislation  what  will  so 
much  more  surely  be  accomplished,  naturally,  through  the 
laws  of  trade.     *    *    *     If  we  only  permit  coin  to  be  still  re- 


SECOND  ISSUE  OF  LEGAL-TENDERS.  203 

ceived  for  duties  on  imports,  it  is  equally  certain  that  the 
amount  will  exceed  the  current  demands  for  interest  on  the 
public  debt."     *     *     * 

The  liabilities  of  the  Treasury,  to  be  met  upon 
resumption,  were  stated  by  the  Senatof  to  be  $430,- 
039,516;  of  which  $346,680,016  consists  of  notes, 
$55,044,500  of  coin  certificates,  and  $28,315,000  of 
currency  certificates.  Its  reserves,  to  meet  these 
liabilities,  are  :  coin  in  the  Treasury,  $156,031,236  ; 
to  be  received  under  the  recent  loan,  $40,000,000  ; 
currency,  $39,478,141.  The  reserves,  consequently, 
will  equal  53^^  per  cent,  of  the  liabilities.  The  old 
safe  ratio,  he  tell  us,  of  reserves  to  be  held  by  the 
banks  equals  33)^  percent,  of  their  liabilities.  Gov- 
ernment, consequently,  is  nearly  twice  as  strong; 
but  there  is  no  probability  that  it  will  be  called  upon 
to  pay  out  even  one-sixth  of  its  reserves.  Its  notes 
are,  he  tells  us,  in  "  broadcast,  healthy  circulation," 
and  "cannot  be  massed  in  large  amounts  for  re- 
demption." 

"Some  question  has  arisen  as  to  the  ability  of  the  banks  to 
resume  at  the  time  appointed  for  resumption  to  take  place  on 
the  part  of  the  government.  But  the  character  and  resources 
of  these  banks  make  it  certain  that  there  will  be  neither  hesi- 
tation nor  difficulty  about  the  matter.  *  *  *  Diffused  over  a 
broad  country,  from  the  Atlantic  to  the  Pacific,  and  held  in 
the  pocketsof  millions  of  people,  these  notes  cannot  be  gath- 
ered and  assorted  in  formidable  amounts  to  be  presented  for 
redemption.  The  business  of  presenting  bank  notes  will  not 
pay  when  gold  is  only  \(^  of  i  per  cent,  premium,  and  when 
there  will  always  remain  the  option  of  redemption  in  Ic^al- 


204    ^^SUMPTION  AXD  THE  SILVER  QUESTION, 

tender  noics  or  silver  coin  ;  but  whatever  may  be  presented 
will  surely  be  promptly  paid. 

"There  are  now  outstandinff  and  unredeemed  of  national 
bank-notes,  $300,502,350.     The  fund  to  redeem  with  is  : 

Specie $54,546,201 

United    States   legal-tender    notes   on 

hand 84,478,733 

United  States  legal-tender  5  per  cent. 

redemption  fund,         ....     15,072,726 


$154,097,659 

"  But  the  banks  have  a  much  larger  reserve  available  at  a 
pinch,  or  in  any  great  emergency.  They  have  deposited  with 
the  Treasurer  of  the  United  States,  $343,385,350  in  bonds, 
for  the  security  of  these  same  notes,  which  will  at  any  mo- 
ment command  the  best  money  of  the  world  at  home  or 
abroad.   *  *  * 

"  It  may  be  still  said  that  there  are  no  visible  means  of 
meeting  a  sudden  demand  made  for  the  large  amount  of  de- 
posits ;  but  it  can  be  answered  that  even  in  times  of  severe 
stringency  the  aggregate  amount  of  deposits  seldom  suddenly 
changes,  as  lenders  only  become  more  cautious.  Bank  de- 
posits are  diminished  in  good  and  prosperous  times  when 
nobody  is  afraid.  It  can  be  further  answered  that  large  de- 
mands for  the  payment  of  deposits  have  never  been  made, 
except  upon  banks  of  deposit  having  no  circulation,  and  pro- 
bably never  will  be,  for  the  sufficient  reason  that  the  deposits 
of  banks  belong  to  their  customers  or  to  their  stockholders  ; 
and  such  persons  will  not  pull  down  the  pillars  of  their  own 
temples,  when  they  would  be  the  foremost  to  be  buried  or 
crushed  beneath  the  ruins." 

In  conclusion  he  stated  that  "nearly  all  the  serious  obsta- 
cles to  resumption  had  been  surmounted  ;  that  whether  or 
not  there  has  been  heretofore  any  contraction  of  the  money 
of  the  country,  there  will  be  none  after  resumption  ;    for  the 


SECOND  ISSUE  OF  LEGAL-TENDERS.        205 

reason  that  resumption  will  resurrect  more  than  two  hundred 
millions  of  actual  coin,  and  give  vitality  to  the  whole  volume 
of  money  in  circulation." 

So  much  for  a  currency  of  government  notes  in 
1878.  The  argument  of  the  Senator,  it  will  be 
seen,  is  but  a  repetition  of  that  of  the  Secretary  of 
the  Treasury  before  his  own  committee.  There  is  to 
be  no  retirement,  but  "  equivalency."  Let  us  see 
what  such  a  currency  was  in  anticipation  sixteen 
years  ago.  The  Senator  was  then  a  member  of  the 
House  of  Representatives.  When  the  bill  author- 
izing the  first  issue  of  notes  was  before  the  House, 
he  made  on  February  4th,  1862,  a  most  able  and 
earnest  speech  in  opposition,  from  which  the  fol- 
lowing extracts  are  given : 

"The  subject  of  issuing  $150,000,000  of  paper  currency, 
and  making  it  a  legal  tender  by  the  government  at  a  single 
V)ound — the  precursor,  as  I  fear,  of  a  prolific  brood  of  prom- 
ises, no  one  of  which  is  to  be  redeemed  in  the  constitutional 
standard  of  the  country— could  not  but  arrest  my  attention, 
and  having  strong  convictions  of  tlie  impolicy  of  the  measure, 
I  should  feel  that  I  utterly  failed  to  discharge  my  duty  if  I  did 
not  attempt  to  find  a  stronger  prop  for  our  country  to  lean 
upon  than  this  bill — a  measure  not  blessed  by  one  sound  \>xq- 
Zft<\<tx\\.,  and  damned  by  all.  *  *  * 

"  If,  by  the  provisions  of  this  bill,  we  cut  ourselves  olT  from 
all  other  resources,  it  is  to  be  considered  how  much  could  be 
realized  from  this,  in  my  judgment,  the  weakest  resource 
-within  our  grasp,  which  is  the  power  of  a  bank  0/ issue,  with- 
out any  capital,  and  not  ei>en  specie  enouj^h  to  tender  the 
odd  change.    It  is  an  experiment  to  inject,  by  a  governmental 


206     RF^SUMPriON  AND  THE  SILVER  QUESTION. 

force-pump,  into  the  arteries  of  commerce  a  new  currency, 
when  the  arteries  are  already  filled.  *  *  * 

"I  object  to  this  bill  on  the  ground,  as  I  conceive,  of  its 
utter  impolicy.  I  admit  that  from  the  contracts  entered  into 
— many  of  which,  riow  due,  I  regret  have  not  been  paid  as 
promptly  as  they  deserved  to  be,  and  from  the  heavy  monthly 
disbursements  to  our  army,  that  the  government  can  llood 
the  country  with  even  one  hundred  and  fifty  millions  of  paper 
dollars.  But  from  that  moment  you  "would  vastly  increase 
the  cost  of  carrying  on  the  war,-  prices  would  go  up,  and 
the  addition  we  should  pile  upon  our  national  debt  would 
prove  that  it  might  have  been  even  wiser  to  have  burnt  our 
paper  dollars  before  they  were  issued.  The  inflation  of  the 
curreticy  would  be  inevitable.  In  ordinary  times  few  com- 
prehend the  Archimedean  leverage  of  a  very  few  millions 
added  to  or  subtracted  from  the  currency  of  a  nation  ac- 
tively engaged  in  the  afTairs  of  the  vvorld.  In  the  former 
case  it  produces  a  crisis  and  general  bankruptcy,  and  in  the 
latter  it  puts  every  speculator  on  tiptoe  to  buy  out  his  neigh- 
bor— his  horse,  his  ox,  his  ass,  or  anything  that  by  keeping 
over  night  will  put  money  in  his  purse.  Property  becomes  as 
volatile  as  alcohol  at  boiling  heat,  and  cannot  be  kept  with- 
in its  ancient  boundaries.  The  poor  man  accustomed  to 
butcher  svieat,  and  who  has  not  counted  tea  and  coffee  as 
luxuries,  suddenly  finds  their  daily  tise  beyond  his  means. 
'  The  ecstasy  of  an  inflated  currency  is  enjoyed  by  the  few 
only,  and  these  are  cruelly  punished,  when  the  gaseous  influ- 
ence subsides.  *  *  * 

"I  maintain  that  the  bill,  as  reported  by  the  Committee  of 
Ways  and  Means,  should  not  pass,  because  it  will  infinitely 
damage  the  national  credit;  because  it  will  cut  off  all  other 
chance  of  supplies  ;  because  it  will  reduce  our  standard  of 
legal  tender  already  sufficiently  debased  ;  because  it  will  in- 
flate the  currency,  and  increase  many  fold  the  cost  of  the 
war  J  because  it  would  slide  into  the  place  of  proper  taxa- 


SECOXD  ISSUE  OF  LEGAL-TENDERS.  20/ 

tion  ;  because,  as  a  resource,  it  must  ultimately  fail,  and 
tend  to  a  premature  peace  ;  because  it  is  a  question  of  doubt- 
ful constitutionality;  because  it  is  an  ex  post  facto  law, 
immoral,  and  a  breach  of  the  public  faith  ;  because  it  will 
at  once  banish  all  specie  from  circulation  ;  because  it  will 
dampen  the  ardor  of  our  men  at  home  as  well  as  soldiers  in  the 
field  ;  because  it  will  degrade  us  in  the  estimation  of  other 
nations  ;  because  it  will  cripple  American  labor,  and  throip 
at  last  larger  wealth  into  the  hands  of  the  rich  ;  and  be- 
cause there  is  no  necessity  calling  for  such  a  desperate  rem- 
edy." 

Is  it  possible  that  the  same  man  delivered  these 
two  speeches?  One  such  an  indignant  and  elo- 
quent protest  against  "  a  currency  not  blessed  by  a 
single  precedent,  but  damned  by  all  ;  "  and  the 
other  an  equally  emphatic  support  of  a  currency 
similar  in  kind;  not  of  $150,000,000,  but  of  $346,- 
000,000  I — a  currency  which  is  at  last  to  usher  in 
our  financial  millennium  ! 

The  speeches  of  the  Senator  on  the  two  occa- 
sions not  only  show  the  tremendous  revolution 
which  has  taken  place  in  the  sentiment  of  the 
country,  but  the  almost  insuperable  obstacles  op- 
posed to  all  efforts  at  reform.  The  cause  is  far 
weaker  in  the  hands  of  its  friends  than  in  those  of 
its  enemies.  The  arguments  of  the  latter  can 
be  easily  combated,  while  those  of  the  former,  ap- 
parently so  reasonable,  lead  in  the  end  to  results 
precisely  similar.  According  to  the  Senator,  $346,- 
000,000  of  government  notes  arc  good  inoney. 
As  there  is  no  recovery  of  the   country  from   its 


2o8     RESUMPTION  AND  THE  SILVER  QUESTION. 

depressed  condition,  the  question  naturally  sug- 
gests  itself,  would  not  an  increase  of  this  good 
money  to  $400,ooo,(XX>  help  to  start  things  ?  Who 
ever  heard  of  there  being  too  much  of  metallic 
money?  A  nation  is  always  rich  in  ratio  to  its 
amount.  If  not  wanted  as  currency,  it  is  mer- 
chandise for  export.  There  never  can  be  too 
much  symbolic  money,  as  this  only  measures  the 
amount  of  merchandise  fitted  for  consumption,  is 
the  instrument  for  reaching  it,  and  disappears 
when  it  is  reached.  Such  money  is  at  the  par  of 
gold  for  the  reason  that  it  secures  whatever  gold 
as  currency  can  secure — even  gold  itself.  After 
government  money  is  to  be  raised  to  the  par  of 
gold,  how  can  there  be  too  much  of  this?  Suppose 
the  present  amount  to  be  increased  to  $700,000,000, 
maintained  at  par  by  a  provision  of  $250,000,000 
in  coin.  Government  would  be  the  gainer  by  an 
amount  equal  to  the  interest  on  $450,000,000,  the 
excess  of  the  notes  and  coin,  while  the  country 
would  have  $350,000,000  more  capital.  The  con- 
clusion, in  the  present  state  of  the  popular  mind,  is 
irresistible.  The  premises  of  the  Senator  granted, 
all  is  granted,  at  least  with  a  proportional  increase 
of  coin  reserves,  that  the  most  ardent  greenbacker 
could  desire. 

To  all  this  must  be  opposed  the  utter  incom- 
petency of  government  to  issue  a  convertible  or 
useful  paper  money  of  any  kind.     What  is  a  con- 


SECOND  ISSUE  OF  LEGAL-TENDJERS. 


209 


vertible  and  useful  currency? — a  question  that  can 
never  be  too  often  asked  or  answered  in  the  pres- 
ent state  of  the  public  mind.  Instruments  arising 
out  of  the  operations  of  production  and  trade;  this 
is  all.  When  a  farmer  gives  an  order  for  the  deliv- 
ery of  an  ox  or  a  horse,  he  gives  that  which  is  pre- 
cisely the  same  in  kind  as  the  notes  of  specie-pay- 
ing banks.  Where  the  order  directs  the  delivery 
to  the  bearer  of  the  thing  described,  it  is  currency, 
precisely  as  much  so  as  the  notes  of  specie-paying 
banks.  If  the  order  be  for  an  ox  or  a  horse  which 
the  drawer  cannot  convey,  he  must  make  good  the 
amount  in  coin,  or  its  equivalent.  The  use  of  such 
currency — orders  for  capital — is  the  prime  condi- 
tion of  anything  like  an  extended  production  and 
trade.  Society,  as  at  present  constituted,  cannot 
exist  without  them.  When  the  thing  is  reached 
the  instrument  has  fulfilled  its  mission,  and  has  no 
longer  any  force.  It  cannot,  without  a  new  sanc- 
tion, go  on  transferring  ox  after  ox  or  horse  after 
horse,  any  more  than  can  the  receipt  for  one  dollar 
stand  for  the  payment  of  thousands.  The  moment 
the  connection  is  severed  between  the  order  and 
the  constituent,  the  former  falls  to  the  ground. 
Government  money  is  the  order  without  the  ox  or 
the  horse — without  the  constituent — and  would  in- 
stantly fall  to  the  ground  but  for  the  fact  that 
being  legal  tender,  it  must  be  accepted  as  the 
equivalent  of  an  ox  or  a  horse  which  may  have  no 
existence  whatever.     It  is  an  active  force  or  jjowcr 


210    RESU.^K'TION  AND  7V/E  SILVER  QUESTION. 

to  which  nothing  corresponds.  It  inflates  prices 
for  the  reason  that  there  are  now  two  dollars  to 
offer  for  the  merchandise  upon  the  market  where 
there  was  one  before.  When  accepted  and  used, 
it  is  still  as  much  in  use  as  ever.  It  is  always 
the  same  in  quantity,  even  if  there  were  not  a  dol- 
lar's worth  of  merchandise  in  existence.  The  rea- 
son why  a  symbolic  currency,  no  matter  how  great 
its  amount,  has  no  tendency  to  produce  specula- 
tion and  raise  prices  is  that  its  use,  by  reaching  the 
thing  symbolized,  retires  it.  The  symbol  and  .the 
substance  disappear  by  the  same  act.  What  would 
be  the  condition  of  a  community  were  every  mem- 
ber of  it  allowed  to  issue,  and  could  compel  the  ac- 
ceptance of,  orders  for  oxen  and  horses  of  which  he 
had  neither  the  possession  nor  the  right  of  posses- 
sion, and  which  might  have  no  existence  whatever? 
We  need  not  wait  long  for  a  reply.  All  the  opera- 
tions of  society  would  soon  be  involved  in  inex- 
tricable confusion  and  loss.  Government  assum- 
ing to  issue  such  orders  without  any  adequate 
provision  therefor,  and  to  compel  their  acceptance, 
the  result  is  the  same  as  if  every  individual  pos- 
sessed and  exercised  the  same  privilege  and  power. 

According  to  the  Secretary  of  the  Treasury 
and  the  Chairman  of  the  Finance  Committee  of 
the  Senate,  when  government  has  resumed  on  a 
provision  of  $120,000,000,  or,  including  silver,  of 
§140,000,000  in  coin,  the  banks  and  the  country 


SECOND  ISSUE  OF  LEGAL-  TENDERS.  2 1 1 

have  resumed !  Resumption  means  the  establish- 
ment of  a  proper  relation,  not  only  between  the 
metallic  and  paper  currency  of  the  country,  but  a 
proper  relation  between  the  metallic  currency  and 
the  business  and  wealth  of  the  country.  The 
banks  and  the  people  must  hold  reserves  as  well 
as  the  government.  Taking  the  Senator's  ratio  of 
33  K  P*^""  cent.,  the  reserves  to  be  maintained  by  the 
banks  should  equal  say,  $440,000,000— their  circu- 
lation, including  deposits,  equaling  1,448,000,000,* 
as  follows : 

National  bank  notes $314,000,000 

"  "       deposits 626,000,000 

Deposits  of  State  banks  and  bankers 508,000,000 


$1,448,000,000 


The  government  notes  would  bring  up  the  total 
circulation  to  $1,794,000,000.  These  need  not  be 
counted,  for  the  reason  that  when  government  re- 
sumes it  ceases  to  be  an  issuer  of  currency.  When 
the  banks  resume  their  circulation  will  be  so  much 
reduced  that  they  will  not  have  to  hold  over  $300,- 
000,000  coin.  If  such  an  amount  were  held  by  them, 
and  it  included  all  the  coin  in  the  country,  they 
could  not  maintain  resumption  24  hours.  The  proper 
order  of    resumption   is  for  the  people   to  resume 

*  In  .iddilinn  to  the  lialiililies  of  the  national  and  State  lianks 
and  hankers,  are  $^43,000, 000  of  deposits  in  savinjjs  l)anks,  making 
a  total  of  demand  liahilitics  of  ill  our  banks  of  $2,291,000,000.  See 
Finance  Keport  for  1877,  p.  142. 


2 1 2     KESUMP  TION  A  ND  THE  SIL  VER  Q  VEST  I  ON. 

first,  SO  as  to  be  in  position  to  sustain  the  banks, 
instead  of  having  every  inducement  to  attack  them. 
In  i860,  the  total  circulation  of  the  banks  of  this 
country  equaled  $459,000,000.  They  held  a  little 
over  $100,000,000  in  coin.  There  were  fully  $150,- 
000,000  of  coin,  in  addition,  in  circulation.  The 
total  percentage  of  coin  to  the  bank  circulation 
equaled  fifty-four  per  cent.  We  must,  before  we 
are  upon  a  sound  basis,  have  a  similar  proportion 
of  coin  to  our  paper  money  —  the  banks  hold- 
ing only  the  smaller  proportion  of  the  former. 
The  most  trustworthy  estimates  place  the  amount 
of  coin  in  France  at  $1,200,000,000,  of  which 
$500,000,000  is  held  by  the  Bank  of  France.  The 
population  of  that  country  equals  only  three 
quarters  that  of  our  own.  The  total  amount  of 
coin  in  England,  whose  population  is  only  about 
three  -  fifths  of  our  own,  equals  $500,000,000. 
The  Germans,  under  their  new  system,  have 
already  issued  coins  to  the  value  of  $477,237,600, 
and  still  have  old  demonetized  coins  of  the  esti- 
mated value  of  $76,000,000  to  be  taken  in.  Our 
country  is  much  more  populous  and  vastly  richer 
than  Germany;  our  paper  currency  is  thrice  greater. 
The  operations  of  banks  only  reflect  those  of  the 
people.  Those  of  the  latter  are  far  greater  in  amount, 
and  must  be  supported  by  corresponding  reserves 
from  which  the  banks  must  draw  their  own.  In 
England,  France,  and  Germany,  coin  in  the  hands 
of  the  people  is  the  great  reservoir  from  which  sup- 


SECOND  ISSUE  OF  LEGAL-TENDERS.         213 

plies  are  drawn  to  meet  sudden  emergencies.  The 
only  way  in  which  tendencies  to  speculative  move- 
ments can  be  checked  is  to  compel  the  public  to 
pay  their  debts  in  coin  by  the  refusal  of  the  banks 
to  make  further  discounts.  That  done,  their  bills 
must,  in  part  at  least,  be  paid  in  coin.  We  have 
been  so  long  upon  a  false  system  of  currency  that 
we  have  lost  all  sense  as  to  what  is  necessary  to 
constitute  a  good  one.  In  our  present  efforts  at 
resumption  we  are  like  architects  who  would  erect 
a  Saint  Peter's  or  a  Saint  Paul's  cathedral  upon  the 
support  of  a  single  pile ! 

The  near  coincidence  in  price  of  gold  and  gov- 
ernment notes  has  nothing  to  do  with  the  value  of 
the  two.  With  our  legal-tender  currency,  gold  coins 
are  merchandise  as  much  as  are  iron  or  lead.  All 
kinds  of  merchandise,  from  an  absence  of  demand, 
have  fallen  within  the  past  three  years  very  largely 
in  price,  in  ratio  to  greenbacks.  Gold  has  fallen 
much  less  relatively  than  other  articles.  It  would 
be  as  absurd  to  say  that  the  present  price  of  gold 
and  greenbacks  expresses  their  relative  value,  as  it 
would  to  say  that  the  price  in  greenbacks  of  a  great 
many  articles  indispensable  to  society,  but  which 
are  produced  and  sold  at  a  loss,  expresses  a  fixed 
relation  between  the  two.  The  time  will  come  when 
the  relative  price  of  notes  and  many  articles  of 
merchandise  will  change  greatly  and  permanently. 
Gold  is  one.    This  cannot  now  be  loaned  as  money 


214    RESUMPTION  AND  THE  SILVER  QUESTION. 

at  anything  like  the  rate  for  greenbacks.  Every 
one  now  expects  that  resumption  will  speedily  take 
place.  Every  one  consequently  prefers  to  hold 
greenbacks  to  gold  for  the  better  use  that  can  be 
made  of  them.  No  one  cares  to  pay  one  per  cent, 
as  the  price  of  conversion  of  paper  into  gold,  when 
he  will  be  presently  able  to  make  the  conversion 
without  paying  anything.  As  it  is,  he  is  better  off, 
apparently,  with  notes  than  gold.  The  same  per- 
son may  not  wish  to  exchange  greenbacks  for  iron, 
although  it  may  speedily  be  seen  that  iron  is  worth 
a  great  deal  more  than  its  present  price  in  the 
former.  As  it  is,  the  public  have  wholly  thrown 
aside  all  consideration  of  values,  and  infer  that  of 
greenbacks  from  their  present  accidental  approach 
to  gold.  Their  value  depends  wholly  upon  the  pro- 
vision for  their  redemption.  They  are  apparently 
worth  at  least  35  per  cent,  of  their  nominal  amount, 
for  the  reason  that  such  proportional  provision  has 
been  made  for  their  retirement.  To  such  value  is 
to  be  added  the  provision  yet  to  be  made.  Should 
the  additional  65  per  cent,  be  made  so  as  to  be 
available  on  the  ist  day  of  January,  1882,  their 
value  would  equal  their  nominal  amount,  less  in- 
terest up  to  the  time  of  their  payment.  In  other 
words,  their  price  would  be  their  value  established 
by  the  rules  by  which  the  value  of  all  other  kinds 
of  property  is  established.  It  will  soon  be  seen, 
however,  that  no  connection  can  be  established  be- 
tween the  notes  and  coin  collected  in  the  Treasury. 


SECOND  ISSUE  OF  LEGAL-TENDERS.         215 

The  notes  with  the  provision  to  be  made  for  them 
will  not  come  to  the  par  of  gold ;  nor  will  silver 
coined  at  10  per  cent,  below  its  bullion  value.  The 
doors  of  the  Treasury  will  not  be  unlocked.  This 
point  reached — the  inability  of  the  government  to 
resume  upon  the  provision  proposed — comes  the 
real  tug  of  war.  If  the  government  has  sufficient 
manliness  it  will  say  :  "  We  have  been  mistaken ;  we 
thought  a  part  would  pay  a  whole  ;  we  must  now 
take  time  to  prepare  for  the  whole."  Upon  the 
action  taken  upon  such  an  issue  depends  the 
answer  to  the  question,  Will  the  country  resume  by 
a  retirement  of  its  notes  by  payment  in  some  form, 
or  by  repudiation  ?  an  act  which  will  necessarily  in- 
clude the  practical  repudiation  of  the  public  debt, 
for  the  reason  that  this  will  be  speedily  made  pay- 
able in  the  notes.* 

*  It  is  hardly  necessary  to  give  a  detailed  account  of  tlie  "  Con- 
federate" currency.  The  amount  issued  equaled  $672,805,000,  as 
follows : 

Issued  in  Amount. 

1861 $161,500,000 

1862 123,000 

1863 511,182,000 

Total $672,805,000 

The  currency  ceased  to  have  any  value  after  the  surrender  of  Lee. 
Its  effect  was  to  ruin  every  bank  and  savings  hank  in  ihe  South. 
After  their  terrible  experience,  is  it  not  incredible  that  the  peojdc 
of  that  section  should  insist  ujKjn  the  maintenance  of  a  currency, 
the  same  in  kind  as  that  which  ruined  them,  and  which  may  repeat 
to  ihem  the  experience  of  the  past  ? 


2i6    RESUMPTION  AND  THE  SILVER  QUESTION. 

The  following  statement  shows  the  depreciation  of  that  currency 
at  diflerent  periods : 

Period.  Value  per  $ioo. 

January  i,  1862 $I20 

July  I,  "     ■ igo 

January  I,  1863 310 

July  I,     "  700 

January  I,  1864 l,8oo 

July  I,  "     1,700 

January  i,  1865 3,400 

April  10,       "     5,500 


PART  V. 
THE    GREENBACK    PARTY. 


This  party  may  be  considered  as  formally  organ- 
ized, distinct  from  all  others,  by  a  general  con- 
vention of  delegates  held  at  Toledo,  Ohio,  on 
the  22d  of  February,  1878,  at  which,  among  other 
things,  the  following  preamble  and  resolutions  were 
adopted : 

Whereas,  Throughout  our  entire  country  the  value  of  real 
estate  is  depreciated,  industry  paralyzed,  trade  depressed, 
business  incomes  and  wages  reduced,  unparalleled  distress 
inflicted  upon  the  poorer  and  middle  ranks  of  our  people,  the 
land  filled  with  fraud,  embezzlement,  bankruptcy,  crime,  suf- 
fering, pauperism,  and  starvation  ;  and 

IVhereas,  This  state  of  things  has  been  brought  about  by 
legislation  in  the  interest  of  and  dictated  by  vioncy-lenders, 
bankers,  and  bondholders ;  and 

Whereas,  The  limiting  of  the  legal-tender  quality  of  green- 
backs, the  changing  of  currency  bonds  into  coin  bonds,  the 
demonetization  of  the  silver  dollar,  the  ex'cepting  of  bonds 
from  taxation,  the  contraction  of  the  circulating  medium,  tiie 
proposed  forced  resumption  of  specie  payments  were  crimes 
againt  the  people,  and,  as  far  as  possil)le,  the  results  «f  tln-se 
criminal  7\.c{^  must  be  counteracti-d  by  judicious  legislation  ; 

Therefore  we  assemble  in  National  Convention,  and  make 

a  declaration  of  our  principles,  and  invite  all  patriotic  citizens 

to  unite  in  an  effort  to  secure  financial   reform  and  industrial 

emancipation.      The   organization    shall    be    known    as   the 

10  217 


21 8     RESUMrriON  AND  THE  SILVER  QUESTION. 

"National  Party,"  and  under  this  name  wew  ill  perfect,  with- 
out delay,  national,  State,  and  local  associations  to  secure  the 
election  to  office  of  such  men  only  as  will  pledge  themselves 
to  do  all  in  their  power  to  establish  these  principles : 

first — It  is  the  exclusive  function  of  the  General  Govern- 
ment to  coin  and  create  money,  and  regulate  its  value.  All 
bank  issues  designed  to  circulale  as  money  should  be  sup- 
pressed. The  circulating  medium,  whether  of  metal  or 
paper,  shall  be  issued  by  the  government,  and  made  a  full 
legal  tender  for  all  debts,  duties,  and  taxes  in  the  United 
States  at  its  stamped  value. 

Second— i:\\tr&  shall  be  no  privileged  class  of  creditors. 
Official  salaries,  pensions,  bonds,  and  all  other  debts  and  ob- 
ligations, public  and  private,  shall  be  discharged  in  the  legal- 
tender  money  of  the  United  States,  strictly  according  to  the 
stipulations  of  the  laws  under  which  they  were  contracted. 

Third— Resolved,  That  the  coinage  of  silver  be  placed  on 
the  same  footing  as  that  of  gold. 

Fourth— (lox\<gxts?,  shall  provide  said  money  adequate  to 
the  full  employment  of  labor,  the  equitable  distribution  of  its 
products,  and  the  requirements  of  business,  fixing  a  minimum 
amount  per  capita  of  the  population  as  near  as  may  be,  and 
otherwise  regulating  its  value  by  wise  and  equitable  pro- 
visions of  law,  so  that  the  rate  of  interest  will  secure  to  labor 
its  just  reward. 

Should  Congress,  to  relieve  the  distresses  of  the 
country,  provide  for  an  issue  of  its  notes  in  place 
of  those  of  banks,  the  effect  would  be  precisely  the 
same,  so  far  as  production  and  trade  were  con- 
cerned, as  if  it  should,  without  the  possession  of  a 
dollar  of  exportable  capital  of  any  kind,  undertake 
to  draw  all  the  bills  of  exchange  between  the 
United  States  and  other  countries ;  prohibiting  the 


THE  GREENBACK  PARTY. 


219 


drawing  of  a  single  one  by  parties  possessed  of 
such  capital.  How  long  would  it  be  before  the 
commerce  and  industries  of  the  country  would  be 
in  such  confusion,  and  so  reduced  that  the  laborer 
who  now  gets  one  dollar  a  day  would  get  but  half 
a  dollar?  Is  not  the  answer  palpable  to  every  one 
in  the  land? 

Suppose    government    to    undertake,    as   is   de- 
manded, to  issue  an  amount  of  its  money  adequate 
to  secure  full  and  remunerative  wages  to  labor,  say 
$1,000,000,000,  how  is  it  to  be  issued?     The  reve- 
nues  to-day  exceed    the  expenditures ;  so  that  it 
could  not  be  got  out  in  their  payment.     It  is  not 
to  be  given  away.     If  it  were,  it  would  have  no 
purchasing  power  whatever.     Those  who  received 
it  as  a  gift  would  have  to  give  it  away.     No  one 
expects  to  receive  it,  or  pay  it,  at  any  other  rate 
than  its  market  value  in  gold.     No  one  will  receive 
it^or  pay  it,  at  any  other  value.     If  issued  at  all,  it 
can  be  issued   only  in   exchange   for,  or  payment 
of,  the  public  debt.     This,  in  fact,   is  the    method 
proposed.     Those  who  would  receive   it   would   be 
the  rich.     Not  a  dollar  would  come,  in  the  outset, 
into  the  hands    of  the  masses — of  the  poor — and 
never,  unless  paid  for  at  its  full  value.    They  would 
be  compelled  to  receive  it  at  its  nominal  value  for 
everything  they  might  have  to    sell.     To  the  na- 
tural effect  of  such  money,  which  always  exhausts 
a  people  in  ratio  to  its  amount,  would  be  added 
that  due  to  the  withdrawal  of  the  rich  from  the 


220    RESUMPTION  AND  THE  SILVER  QUESTION. 

operations  of  production  and  trade  among  a  peo- 
ple who  had  shown  themselves  unfit  to  be  longer 
trusted  with  the  money  of  others.  As  their  indus- 
tries would  necessarily  decline,  those  dependent 
upon  labor  would  be  compelled  to  live  upon  their 
past  acquisitions — to  sell  day  by  day  something  of 
what  they  possessed.  There  would  be  none  who 
could  buy  but  the  rich,  with  the  very  money  issued 
to  them  in  exchange  for  their  bonds.  It  would 
not  be  long  before  all  the  valuable  property  of  the 
nation  would  in  this  way  come  into  their  hands  ; 
while  the  money  of  the  country,  which  would  be 
all  the  poor  would  have  to  show  for  what  they  pos- 
sessed, would,  when  the  crisis  came,  be  almost 
wholly  in  their  hands.  All  this  is  a  matter  of 
proof — of  history.  It  was  so  under  the  Continental 
Currency ;  it  was  so  under  the  French  Assignats ; 
it  must  be  so  by  the  force  of  natural  law.  The 
people  may  so  order  it  that  government  money 
shall  pay  debts,  both  public  and  private;  but  they 
cannot  so  order  it  that  they  shall  reach  a  single 
dollar  of  this  money  without  paying  its  full  value 
in  coin  ;  nor  can  they  by  any  power  avoid  receiv- 
ing it,  or  prevent  it  from  becoming,  where  the 
amount  is  large,  utterly  worthless  on  their  hands. 
Our  money,  from  the  smallness  of  its  amount,  and 
the  expectation  of  its  payment,  is  not  greatly  de- 
preciated ;  but  the  transfer,  due  to  its  use,  of  the 
property  of  the  poor  and  middle  classes  to  the  rich 
was  never  going  on  at  a  more  fearful  rate  than  in 


THE  GREENE  A  CK  PARTY.  221 


/ 


this  country  at  the  present  time.  It  only  needs  a 
large  increase  of  such  money  to  make  such  transfer 
speedy  and  complete:  The  whole  attention  of  the 
laborer,  from  morning  till  night,  is  necessarily  riv- 
eted upon  his  work.  He  has  neither  the  means  nor 
the  opportunity  of  forecasting  the  future  or  of  fore- 
stalling the  market,  but  takes,  at  the  close  of  the 
day,  his  accustomed  dollar — for  it  will  be  a  long  time 
before  the  rates  of  his  wages  rise  in  consequence  of 
the  issue — to  find  that  it  will  only  procure  for  him 
one-half  the  accustomed  amount  of  food  and  cloth- 
ing. If,  as  is  demonstrable  to  the  most  ordinary 
understanding,  the  laborer  always  receives  a  green- 
back at  its  value  in  coin,  and  if  from  the  fluctuation 
in  its  value  he  always  runs  the  risk  of  loss  by  taking 
it,  and  may  lose  its  whole  value,  why  should  he 
not  demand  to  be  paid  in  coin,  instead  of  green- 
backs at  their  value  at  the  time  in  coin  ?  There 
can  be  but  one  answer  to  this.  A  greenback  cur- 
rency cannot  by  any  possibility  benefit  the  labor- 
ing man.  It  is  always  harmful  to  him — ist,  by  in- 
creasing competition,  and  reducing  his  proper  share 
'  of  merchandise  upon  the  market;  2d,  by  its  effects, 
first  by  stimulating,  then  by  paralyzing  all  the 
industries  of  the  country,  in  consequence  of  which 
he  loses  all  opportunities  for  labor.  History  is 
full  of  examples  of  such  currencies.  There  never 
was  one  that  was  not  an  unmitigated  evil,  and 
never  one  issued  on^a  large  scale  that  did  not 
end  in  repudiation,  the  necessary  result  of  the  im- 
poverishment  and  ruin  it  caused. 


222     RESUMPTION  AND  THE  SILVER  QUESTION. 

Government,  according  to  the  Greenback  party, 
is  to  undertake  to  provide  such  an  amount  of  its 
notes  that  labor  is  to  receive  its  adequate  reward  ; 
in  other  words,  society  is  to  provide  the  means  for 
the  support  of  every  one  who  may  claim  to  be  out 
of  work.  If  so,  those  to  be  provided  for  will  soon 
vastly  outnumber  all  others.  The  real  question  is 
whether  we  shall,  without  delay,  turn  ourselves  into 
a  nation  of  communists — attempt,  we  should  say, 
for  all  such  propositions  are  but  the  dreams  of 
madmen.  There  might  be  some  apology  for  an  at- 
tempt to  realize  communism  by  means  of  indus- 
trial organizations ;  but  an  attempt  to  realize  it  by 
means  of  an  unlimited  issue  of  paper  money,  would, 
instead  of  making  us  a  nation  of  communists,  make 
us  a  nation  of  cutthroats,  preying  upon  each  other, 
till  society  became  so  exhausted  as  to  be  only  too 
glad  to  escape  from  its  fearful  condition  at  any 
price,  even  that  of  a  grinding  despotism.  Are  the 
property  holders,  the  farmers,  those  upon  whom,  in 
this  sorely  taxed  land,  rest  the  burdens  of  govern- 
ment and  society,  prepared  to  accept,  or  tolerate 
even  a  creed,  the  effect,  and  on  the  part  of  the 
leaders  the  object,  of  which  is  to  encourage  the 
more  lawless  and  dangerous  passions  of  our  nature, 
and  which,  if  triumphant,  cannot  fail  to  subvert 
alike  all  property  and  order? 

While  communism  is  one  of  the  greatest  dangers 
that  can  menace  a  State,  it  fs  always  the  product  of 


THE  GREENE  A  CK  PARTY.  223 

bad  government  or  of  some  great  social  wrong. 
The  people  never  rise  up  against  the  government, 
against  the  existing  order  of  things,  without  great 
provocations.  If  they  did,  both  government  and 
order  would  be  impossible.  There  may  be  great 
want  and  great  suffering,  but  these  are  quietly  borne, 
and  by  none  more  patiently  than  by  the  poor,  pro- 
vided no  one  appears  to  be  justly  consurable  for 
their  distresses.  The  people  of  France,  previous  to 
the  great  revolution,  had  for  centuries  borne,  with 
a  patience  that  exceeds  belief,  the  most  terrible 
exactions  of  a  depraved  and  remorseless  govern- 
ment. Their  subsequent  excesses  only  measured 
the  extent  of  their  wrongs.  In  the  United  States, 
we  should  not  have  heard  one  word  favoring  com- 
munism, but  for  our  currency.  That  is  the  sole 
cause.  The  effect  will  constantly  increase  in  mag- 
nitude and  power  so  long  as  the  cause  remains.  Re- 
move that,  and  every  trace  of  communism  will  al- 
most instantly  disappear.  Prosperity  will  instantly 
return.  A  demand  will  at  once  be  created  for 
labor.  The  great  mass  now  so  clamorous  will  be 
only  too  happy  at  such  a  solution  of  the  question. 
Among  our  own  race,  at  least,  a  community  that 
has  no  just  cause  of  complaint  is  always  orderly 
and  docile.  With  it  a  sense  of  duty  is  the  para- 
mount law.  There  can  be  no  prosperity  where 
an  enforced  currency  is  the  basis  of  the  whole 
monetary  system  of  the  nation.  Unless  we  ad- 
dress ourselves  to  the   removal  of  the  cause,  the 


224    RESUMPTION  AND  THE  SILVER  QUESTION. 

movement  now  so  formidable  will  rapidly  gain  in 
strength,  with  constantly  increased  demands — de- 
mands which,  if  complied  with,  will  be  the  des- 
truction of  the  very  conditions  through  which  alone 
relief  can  come. 

As  there  is  no  instrument  or  contrivance  so 
potent  as  a  currency  of  government  notes  for 
brutalizing  a  nation,  its  issue  always  becomes  the 
occasion  on  which  desperate  and  revolutionary 
characters,  by  arousing  the  passions  of  a  dis- 
tressed and  distracted  people,  and  by  exciting  a 
war  of  classes,  the  most  terrible  and  most  sanguin- 
ary of  civil  conflicts,  rise  to  positions  of  influence 
and  power.  Never  was  there  such  an  opportunity 
as  that  afforded  by  the  Assignats  of  France,  which 
far  exceeded  in  amount  and  effect  all  examples  of 
the  kind.  Never  did  such  cruel  and  remorseless 
demagogues  appear  on  any  stage  of  action  as  those 
who  inflamed  the  populace  of  Paris,  and  urged 
them  to  their  final  destruction.  The  same  condi- 
tions, though  less  in  degree,  exist  in  the  United 
States.  A  period  of  unexampled  distress,  due  to 
our  currency  of  government  notes,  prevails.  The 
readiest  and  most  popular  explanation  is  that  it 
has  been  caused  by  the  avarice  and  selfishness  of 
the  rich.  Vast  masses  are  in  debt.  Their  creditors, 
who  demand  payment,  first  robbed  them  by  the 
conversion  of  currency  into  gold  bonds ;  then  by 
the  act  demonetizing  the  silver  dollar;  then  by 
that  for  the  resumption  of  specie  payments ;  then 


THE  GREENBACK  PARTY. 


225 


by  the  contraction  of  the  currency.  All  these 
measures  were  conspiracies — were  crimes — of  the 
rich  against  the  poor,  and  are  to  be  resisted  by 
every  means  in  the  power  of  the  latter — in  the  last 
resort,  by  revolution. 

"  If  I  were  in  debt  five  years  ago,"  said  Mr.  Bland,  author 
of  the  bill  remonetizing  silver,  to  a  delegation  of  New  York 
bankers  and  merchants  who  visited  Washington  to  remon- 
strate against  its  passage,  "a  hundred  dollars,  the  wages  of 
my  labor,  worth  one  dollar  a  day,  would  pay  the  debt.     To- 
day, by  the  reduction  of  the  volume  of  the  circulating  me- 
dium, you  have  so  reduced   prices,  till   labor  is  worth  only 
fifty  cents  a  day  ;  and  instead  of  paying  with  a  hundred  days' 
work,  it  now  takes  two  hundred.     That   is  the   complaint. 
These  are  plain  propositions,  and  the  West  can  understand 
them.     *     *     ♦     And    having  contracted    debts  on  a  paper 
basis  at  inflated  prices,  you  now  ask  them  to  pay  you  at  con- 
tracted prices;  you  take  two   bushels  of  wiieat,  whereas  you 
gave  them  but  one.     I  now  want  to  say  to  you,  with  all  due 
deference,  that  you  had  better  accept  this  projiosition  "  (to  coin 
silver  at  10  per  cent,  above  its  bullion  value).  "  If  I  know  the 
people  I  represent,  and  I  think  I  do,  tluvnighout  all  Ihe  West — 
and  we  had  a  little  experiment  last  summer"  (the  great  rail- 
road riots),  "  when   there  was  an  uprising  from  one  end  of 
the  Union  to  the  other — ])romises  were  made  that  liiis  finan- 
cial matter  should  be    attended  to,  and    that   tlus(!    people 
should  have  some  relief ;  and  these  people  went  home,  and 
are  looking  to  Congress. 

"But  I  tell  you  that  if  you  i)ut  on  the  screws  much  further, 
and  reduce  this  people  much  further  to  the  necessities,  when 
their  uprising  comes  again,  there  is  no  power  in  this  govern- 
ment to  put  it  down  again,  and  instead  of  your  bf)n(ls  being 
paid  in  gold,  they  will  be  wiped  out  with  a  sponge  !  " 

10* 


226    RESUMPTION  AND  THE  SILVER  QUESTION. 

The  great  indictment  against  the  conspirators 
who  are  seeking  to  rob  the  people  and  to  reduce 
them  to  slavery,  was  drawn  up  by  Mr.  Voorhees, 
Senator  from  Indiana,  who  in  his  place  in  Congress 
on  the  2d  of  May,  1878,  said  : 

"The  object  of  tlie  law  (demonetizing  silver)  was  soon 
found  to  be  not  the  impossible  task  of  procuring  a  sufficient 
amount  of  the  precious  metals  to  form  the  basis  of  specie  re- 
sumption, but  simply  to  reduce,  retire,  cut  down,  and  destroy 
the  amount  of  money  in  circulation  in  the  hands  of  the  peo- 
ple, until  it  approximated  the  comparatively  small  amount  of 
gold  which  we  had  in  our  possession,  or  which  it  was  possi- 
ble for  us  to  obtain.  In  pursuing  this  purpose  tiie  amount  of 
human  misery,  of  individual  wretchedness,  oi  destitution,  of 
crime,  of  vice,  of  the  destruction  of  property  values,  of  the 
overthrow  of  wealth-producing  establishments  of  industry,  is 
simply  beyond  the  power  of  language  to  describe.  It  is  con- 
ceded on  all  hands  that  in  this  attempt  to  reduce  the  volume 
of  our  circulation,  in  order  to  reach  what  is  called  a  specie 
basis,  the  shrinkage  in  the  values  of  property — that  is  to  say, 
the  absolute  destruction  of  values — has  reached  the  enor- 
mous and  appalling  sum  of  over  $10,000,000,000.  One-fourth, 
at  least,  of  the  property  of  the  United  States  has  been  abso- 
lutely confiscated.  It  is  not  wonderful,  therefore,  that  from 
the  highest  to  the  lowest  intelligences  the  victims  of  this 
vast  natifltial  crime  should  have  very  quickly  discovered  thp 
source  of  their  calamities.  *  *  * 

"  The  servile  castes  of  the  East  Indies,  with  a  blind  and 
ignorant  faith,  worship  the  Juggernaut,  and  feel  no  resent- 
ment when  mangled  and  crushed  by  their  hideous  deity.  It 
is  not  so,  nor  will  it  ever  be,  with  the  American  people. 
They  will  not  worship  at  a  cruel,  heartless  shrine  ;  they  will 
rather  teach  their  children  and  their  children's  children  to 
execrate  the  authors  of  their  misfortunes.  *  *  * 


THE  GREENBACK  PARTY. 


227 


"Sir,  in  point  of  fact  there  nev'er  was  the  slighest  reason 
in  justice  why  the  paper  circulation  of  this  country  should 
have  become  depreciated.  When  the  legal-tender  note  was 
first  authorized  as  money,  if  we  had  said  it  was  good  money, 
and  by  our  acts  convinced  the  world  of  our  sincerity,  it 
would  have  maintained  an  equality  with  the  precious  metals 
from  the  beginning.  This  has  been  the  history  of  other  gov- 
ernments, and  it  would  have  been  our  history,  if  capital  had 
been  capable  of  a  single  throb  of  patriotism  when  it  was 
called  on  to  assist  in  the  preservation  of  the  Union.    *  *  * 

"  The  hard-handed,  sun-burnt  millions  who  rise  to  their 
daily  tasks  while  the  morning  star  is  yet  in  the  sky,  and  toil 
for  a  subsistence  till  the  evening  star  appears,  are  constantly 
lectured  on  the  virtues  of  economy  by  the  dwellers  in  palaces, 
by  the  inmates  ot  gilded  mansions,  by  the  masters  of  liveried 
attendants,  by  the  lords  of  millions,  by  all  such  as  derive  their 
incomes  and  their  luxuries  from  the  labor  and  the  priva- 
tions of  others.  The  poor  are  exhorted  to  give  up  luxuries 
which  they  have  not,  in  order  that  the  rich  may  add  to  their 
already  great  abundance.  Go  to  the  homes  of  those  who  eat 
their  bread  in  the  sweat  of  their  faces,  and  ascertain  if  you 
can  the  extravagances  in  which  they  indulge.  Do  they  main- 
tain costly  equipages,  splendid  carriages,  and  richly  capari- 
soned horses  ?  Are  their  humble  dwellings  adorned  with 
valuable  paintings,  or  fitted  up  with  expensive  furniture  ?  Do 
you  see  pier-glasses  on  their  walls  and  feel  velvet  carpets  be- 
neath your  feet  on  their  floors  ?  Take  a  seat  with  them  at 
their  frugal  but  hospitable  tables.  Do  you  find  extravagance 
there  ?  Where  is  the  solid  silverware,  the  long  succession  of 
flelicate  dishes,  the  various  brands  of  high-priced  wines  ? 
None  of  these  things  are  found  to  tempt  the  epicurean  taste 
of  those  who,  while  preaching  economy  to  the  industrial 
classes,  sit  down  each  day  to  banquets  such  as  Dives  presided 
over  while  Lazarus  lay  at  his  gates  l)cgging  bread.  ♦  ♦  * 
One  lorm  of  slavery  has  been  swept  from   American   soil. 


228     RESUMPTION  AND  THE  SILVER  QUESTION. 

Another  form  has  followed  it,  not  to  last  so  long,  let  us  hope, 
but  equally  remorseless  and  unsparing  in  its  exactions  upon 
labor.  It  is  the  slavery  of  debt.  It  is  upheld  by  the  sanc- 
tions of  law,  but  the  great  question  of  American  statesman- 
ship for  the  next  fifty  years  or  more  will  be  its  abolition,  with- 
out doing  violence  to  our  national  honor.  Year  after  year, 
in  one  form  or  another,  that  leading  idea  will  press  itself  on 
us  for  solution." 

Mr.  Ewing  of  Ohio,  in  a  recent  speech  in  the 
House  upon  the  same  theme,  although  less  graphic 
than  Mr.  Voorhees,  was  equally  emphatic  : 

"  It  would  have  been  happy  for  the  people  if  they  had  consid- 
ered these  questions  earlier.  They  would  have  been  saved, 
among  other  things,  the  passage  of  the  act  of  repudiation  and 
extortion  of  i86g,  by  which  the  contract  on  which  $1,600,000,- 
000  of  the  public  debt  was  made,  was  changed,  to  the  detri- 
ment of  the  people  and  to  the  advantage  of  the  holders  of 
public  securities  without  consideration,  to  a  sum  of  not  less 
tiian  $500,000,000,  and  they  would  have  been  saved  that 
stealthy  and  rascally  act  for  the  demonetization  of  silver  and 
the  crowning  scheme  of  the  money  power  for  the  oppression 
of  the  people,  the  Resumption  law.  No  greater  injury  (he 
said)  could  be  inflicted  on  a  people  by  its  government  than 
the  reduction  of  the  volume  of  currency,  to  which  the  busi- 
ness and  the  values  of  the  country  were  adjusted.  To  de- 
crease the  value  of  money  was  to  strike  at  the  interest  of  the 
whole  body  of  the  people.  *  *  * 

"The  resumption  was  a  practical  confiscation  by  law  of 
$3,500,000,000  of  property.  Three-fourths  of  all  classes  of  the 
people  of  this  country  were  debtors,  and  it  was  their  hard- 
earned  accumulations  that  were  being  wrested  from  them  by 
this  robber-law.  *  *  * 

"  The  thing  has  been  pushed  just  as  far  as  rt  will  bear."    . 


THE  GREENBACK  PARTY. 


229 


The  preceding  extracts  are  the  distant,  but  by- 
no  means  a' faint,  echo  of  the  speeches  of  Couthon, 
Marat,  and  St.  Just,  which,  by  the  terrible  pictures 
they  drew  of  the  wrongs  and  sufferings  of  the  peo- 
ple of  France,  inflamed  their  passions,  aroused 
their  hate  and  goaded  them  on  to  those  fearful, 
excesses  and  crimes,  which  make  that  period  stand 
alone  in  history.  The  pictures  drawn  by  Mr. 
Bland,  Mr.  Voorhees,  and  Mr.  Ewing  are  conceived 
in  the  same  spirit ;  are  couched  in  the  same  in- 
flammatory language ;  are  as  untrue,  as  far  as  the 
cause  is  concerned,  and  tend  to  the  same  terrible 
results  as  those  of  their  great  prototypes  of  the 
Reign  of  Terror.  They  speak  with  the  same  con- 
sciousness of  power.  They  sway  with  the  same  ease 
the  great  assembly  of  the  nation.  Their  first  "  lit- 
tle experiment"  was  the  gigantic  mob,  which,  in 
1877,  with  the  bludgeon  in  one  hand,  and  the  torch 
in  the  other,  seized  so  many  of  our  cities;  which 
for  a  long  time  defied  the  utmost  power  of  the  mu- 
nicipal and  State  authorities,  and  which  only  yielded 
at  last  to  the  strong  hand  of  the  Federal  Govern- 
ment ;  but  not  until  vast  amounts  of  property  had 
been  committed  to  the  flameg,  and  a  great  niftiibcr 
of  lives  sacrificed.  This  first  "  little  experiment" 
is  a  feeble  note  of  warning  of  what  is  to  come,; 
if  the  future  demands  of  the  revolutionists  are  not' 
fully  complied  with.  The  next  "  experiment  "  is 
to  defy  the  whole  pcnver  of  the  I'^ederal  (iovern- 
•ment  itself  I     We  may  affect  to  laugh  at  such  Ian- 


.  230    RESUMPTION  AND  THE  SILVER  QUESTION. 

guagc  ;  but  no  laughing  will  obliterate  the  scenes 
of  1877,  which  for  a  long  time  held  the  nation 
spell-bound  with  terror.  In  the  mean  time,  the 
condition  of  the  people  has  not  improved.  Their 
sufferings  are  still  as  intense  as  ever.  Their  indict- 
ment preferred  against  their  oppressors  has  lost 
none  of  its  force.  They  are  actively  organizing  in 
support  of  the  New  Party,  in  almost  every  town 
and  village  throughout  the  land.  The  great  par- 
ties into  which  the  country  has  been  divided  are 
eagerly  enlisting   under   its   banners.*     It   has  al- 

*  One  illustration  will  suffice  for  all.  Three  years  ago  the  money 
plank,  in  the  platform  of  the  Democratic  party  of  the  State  of 
Maine,  at  its  annual  State  Convention,  was 

"  A  sound  currency,  coin  or  its  equivalent,  essential  to  stabil- 
ity in  business  and  a  restoration  of  prosperity.  Steps  toward  specie 
payments,  and  no  step  backward." 

This  year  a  similar  State  Convention,  held  June  i8th,  1878,  re- 
solved that 

"  We  are  opposed  to  an  irredeemable  currency,  but  believe  in  a 
currency  for  the  government  and  the  people,  the  laborer  and  office- 
holder, the  pensioner  and  soldier,  the  producer  and  the  bondholder. 
We  are  opposed  to  the  present  national  banking  system,  and  in 
^  favor  of  the  gradual  substitution  of  greenbacks  for  national  bank 
bills."   • 

We  know  of  no  more  striking  or  melancholy  illustration  of  the 
decline  in  the  intellectual  and  moral  tone  of  the  country  than  that 
afforded  by  the  recent  action  of  the  Democracy  of  that  Staite  upon 
the  subject  of  the  currency.  This  party  owed  its  second  great  re- 
vival to  the  action  of  Jackson  in  crushing  the  Bank  of  the  United 
States,  that  he  might  inaugurate  the  reign  of  the  money  of  the  Con- 
stitution— silver  and  gold.  The  Democratic  Party,  and  the  Hard- 
Money  Party,  were  for  a  long  time  synonymous  terms.     The  other 


THE  GREENE  A  CK  PART  Y.  2  3 1 

ready  achieved  two  great  triumphs — the  Silver  bill, 
of  which  a' copy  has  already  been  given,  and  that 
prohibiting  the  retirement  of  the  government  notes, 
passed  May  31st,  1878,  of  which  the  following  is  a 
copy  : 

."Be  it  enacted,  etc.,  that  from  and  after  the  passag-e  of  this 
act,  it  shall  not  be  lawful  for  the  Secretary  of  the  Treasury, 
or  other  officer  under  him,  to  cancel  or  retire  any  more  of 
the  United  States  legal-tender  notes  ;  and  when  any  of  said 
notes  may  be  redeemed  or  be  received  into  the  treasury,  under 
any  law,  from  any  source  whatever,  and  shall  belong  to  the 
United  States,  they  shall  not  be  retired,  canceled  or  destroy- 
ed ;  but  they  shall  be  reissued,  and  paid  out  again,  and  kept  in 
circulation  ;  provided  that  nothing  herein  shall  proliibit  the 
cancellation  and  destruction  of  mutilated  notes,  and  the  issue 
of  other  notes  of  like  denomination  in  their  stead,  as  now 
provided  by  law.  All  other  acts,  and  parts  of  acts,  in  con- 
flict herewith,  are  hereby  repealed." 

This  latter  act,  the  second  great  achievement  of 
the  party,  was  to  be  followed  by  others  which  would 
have  completed  the  work  ;  but  they  fell,  in  the 
hurry  attendant  upon  the  close  of  the  session, 
through  a  disagreement  between  the  two  Houses  of 
Congress  in  matters  of  detail.  Bills  having  the 
same  object  were  passed  in  both  by  immense  majori- 
ties.    That  which  passed  the  Senate  is  as  follows : 

great  party  was  accused  of  being,  and  was  overlhro\\n  as,  the  Soft- 
Money  Parly — as  the  jiarty  of  paper.  Now,  the  Hard-Money  I'arty 
of  Maine  not  only  wholly  deserts  its  principles,  but  goes  for  a 
money  iufinitely  worse  than  tlial  of  tiie  banks. 


232     RESUMPTION  AND  THE  SILVER  QUESTION. 

"  Be  it  enacted,  etc.,  that  from  and  after  the  passage  of  this 
act,  United  States  notes  shall  be  receivable  the  same  as  coin 
in  payment  for  the  four  per  centum  bonds  now  authorized  by 
law  to  be  issued  ;  and  on  and  after  October  ist,  1878,  said 
notes  shall  be  receivable  for  duties  on  imports." 

The  House  bill  was  equally  broad  and  compre- 
hensive in  its  terms.  There  can  be  no  doubt  that 
the  present  Congress,  immediately  upon  its  reas- 
sembling, will  pass  a  bill  providing  for  receiving  the 
notes  of  the  government  in  payment  of  the  customs 
duties.  That  done,  we  are  on  a  basis  of  inconver- 
tible government  paper  which  can  neither  be  con- 
verted into  gold,  nor  contracted  ;  and  in  which,  from 
the  necessities  of  the  case,  the  revenues  must  be 
paid,  and  all  indebtedness,  both  public  and  private, 
discharged.  The  most  ardent  repudiationi.st  must 
be  satisfied  with  such  a  victory.  There  is  but 
one  step  farther — to  increase,  as  is  demanded,  the 
amount  of  the  government  notes.  If  such  be  the 
case,  it  will  be  some  consolation  to  know  that  the 
remedy  will  presently  follow  in  the  speedy  repudia- 
tion of  the  notes  themselves.  Government  notes 
can  never  become  the  permanent  currency  of  a 
people.  The  disasters  which  follow  its  use  will 
sooner  or  later  compel  its  abandonment.  What 
folly  to  prolong  its  disastrous  effects  by  continuing 
its  use ! 


PART  VI. 
THE    METHOD    OF   RESUMPTION. 


Should  Congress  enact  that  from  the  1st  day  of 
January,  1880,  its  notes  should  be  legal  tender  only 
for  the  discharge  of  contracts  then  existing,  and 
not  thereafter  be  received  in  the  payment  of  rev- 
enues ;  and  should  provide  for  their  immediate 
funding  into  bonds,  payable  in  fifty  years,  and 
bearing  interest,  say  at  the  rate  of  4  per  cent.,  a 
moderate  amount,  with  the  present  abundance  of 
money,  could  be  funded.  The  process  would,  how- 
ever, proceed  only  for  a  short  time  before  the  rate 
of  interest  on  loans  of  them  would  exceed  that  on 
the  conversion  bonds.  Funding  would  then  cease. 
The  average  rate  for  money  would  probably  exceed 
4  per  cent,  up  to  1880,  when  the  notes  would  be 
discharged  of  the  legal-tender  clause,  and  would 
lose  a  portion  of  their  value.  Their  funding  would 
again  begin,  but  would  not  proceed  far  before  they 
would  again  command  a  higher  rate  of  interest,  on 
loans  of  them  to  parties  who  had  old  contracts  to 
close  up,  than  that  accruing  on  the  bonds.  As 
debts  presently  maturing  were  paid  off,  funding 
would  again  begin,  to  be  checked  in  the  manner 
already  described.  It  woukl  at  no  time  proceed 
at  a  rapid  pace   from  the  uses  which    the   notes 

233 


234     RESUMPTION  AiVD   THE  SILVER  QUESTION, 

would  have  for  other  purposes  than  conversion ;  it 
would  proceed  only  when  money — the  notes — was 
abundant.  The  process  of  resumption  could  not 
cause  an  injurious  contraction,  so  far  at  least  as 
the  debtor  classes  were  concerned.  So  long  as 
there  was  a  demand  for  the  notes,  they  would  remain 
in  circulation  in  full  volume.  For  such  contracts 
as  were  to  mature  at  a  distant  day,  government 
should  reissue  them  in  exchange  for  the  conversion 
bonds.  Such  provision  would  seldom  have  to  be 
resorted  to,  as  creditor  and  debtor  would  in  more 
cases  compromise  their  differences,  and  place  their 
contracts  on  a  specie  basis.  Resumption  on  such 
a  programme  would  excite  no  alarm ;  it  wotild  be 
resumption  without  the  provision  of  a  dollar  of 
coin  by  the  government.  It  would  be  resumption 
at  a  single  bound,  the  only  resumption  that  govern- 
ment should  ever  undertake,  by  declaring  that  on 
and  after  a  certain  day  the  notes  would  be  funded, 
as  the  only  provision  to  be  made  for  them.  It 
would  be  resumption  upon  a  full  currency,  to  de- 
cline in  amount  only  as  it  ceased  to  be  wanted.  It 
could  not  be  attended  with  any  great  shock  to 
business,  as  every  one  would  see  that  there  was  to 
be  no  lack  of  that  wherewith  to  make  his  pay- 
ments. It  could  not  be  oppressive  to  the  debtor 
classes,  as  that  in  which  they  were  to  pay  would 
certainly  not  be  increased  in  value,  and  could  al- 
ways be  had  in  exchange  for  bonds  which,  from 
their  low  rate  of  interest,  would  for  a  long  time  be 


THE  METHOD  OF  RESUMPTION. 


likely,  to  rule  below  the  par  of  gold.  The  moment 
the  proper  measures  were  taken  by  government, 
every  one  would  prepare  for  resumption.  The 
banks  would  be  compelled  to  provide  coin  re- 
serves for  all  their  new  engagements,  as  the  notes 
would  not  serve  as  reserves  for  issues  made  after 
the  law  went  fully  into  effect.  They  would  retain 
all  the  interest  paid  them  on  their  bonds,  and  make 
additions  thereto  from  every  source  within  their 
reach.  The  act  of  resumption  on  the  part  of  the 
government  would,  with  the  exception  of  the  pro- 
vision of  the  conversion  bonds,  be  purely  negative. 
That  on  the  part  of  every  member  of  the  commu- 
nity would  necessarily  be  positive,  requiring  for 
success  time  and  freedom  from  apprehension  as  to 
the  future.  It  is  a  work  upon  which  the  whole 
people  would  enter  with  the  greatest  alacrity,  the 
moment  government  retired  from  the  field.* 


*  The  following  table  shows  the  exports  into  and  imports  from 
the  United  States  for  the  last  five  years,  feckoned  at  their  value  in 
gold: 


Exports. 

Ivipoiis. 

Year  ending 

Total. 

Specie. 

Total, 

Specie. 

lune  •JO.  1874 

\  . 
( 

■  lO 
■JO 

■  10 
$301,660,000 

$573,081,000 
531,473,000 

466,265,000 
429.740,000 

128,455,000 

1871; 

20,90  l,«in<} 

'•    1876 

"       »877 

May  31,  1878  (it  mos.).. 

Total 

i3,io6,6oa,ooo 

•».4S4.97<*.ooo 

J'     . 

The  excess  of  exports  of  the  counlry  over  imports,  within  a  lit- 
tle less  than  five  years,  have  equaled  $65i,G26,cxx:> !    A  correspond- 


236    RESUMPTION  AND  THE  SILVER  QUESTION. 

As  the  hypothetical  would  be  an  effective  me- 
thod, attended  with  the  least  possible  amount  of 
injustice,  and  creating  the  least  possible  amount 
of  embarrassment,  it  is  the  one  that  should  be 
adopted.  So  far  from  creating  any  alarm,  it  would 
instantly  set  every  industry  in  motion,  from  the 
confidence  it  would  inspire.  To-day  it  is  feared 
that  should  the  Secretary  attempt,  upon  partial 
provision,  to  resume,  there  would  be  an  immediate 
rush  for  coin,  producing  a  corresponding  contrac- 
tion of  the  currency.  Although  the  coin  drawn 
would  be  money,  it  would  not  immediately  take 
the  place  that  had  been  filled  by  the  notes,  nor 
serve  presently  as  reserves  for  increased  issues  by 
the  banks.  Should  it  be  attempted  to  resume  by  a 
full  provision  of  $346,000,000,  the  whole  would  be 
speedily  drawn,  to  be  followed  by  a  shock  which 
would  involve  every  interest  of  the  country  in  a 
common  ruin.  It  is  impossible  that  government 
should  resume  by  payment ;  or  rather,  in  view  of 
the  disasters  which  would  be  inevitable,  it  could 
never  be  brought  to  such  a  step.  The  Secretary  saw 
this;  hence  his  doctrine  of  "equivalency,"  in  conse- 

ing  sum  should,  by  the  laws  of  trade,  have  been  received  in  specie — 
a  sum  nearly,  or  quite  sufficient,  to  put  the  country  on  a  specie 
basis.  What  an  opportunity  has  been  lost  to  it.  The  govern- 
ment has,  by  purchase,  accumulated  for  various  purjjoses  about 
$200,000,000  in  coin,  but  hardly  anything  has  been  accumulated 
by  the  banks,  or  has  entered  into  the  channels  of  trade.  Nothing 
of  the  kind  will  be  done  except  for  purposes  of  speculation,  so  long 
as  the  public  can  meet  their  obligations  in  the  government  notes. 


THE  METHOD  OF  RESUMPTION. 


237 


quence  of  which  there  was  to  be  no  inducement 
to  draw  the  notes ;  and  the  retention  of  the  legal- 
tender  clause,  to  be  resorted  to  when  he  was  hard 
pressed.  Instead  of  manfully  facing  the  question, 
he  only  hid  his  head  in  the  sand.  Instead  of  treat- 
ing money  as  a  subject  coming  within  the  range  of 
the  exact  sciences,  he  deduced  its  laws  from  his 
necessities  and  from  his  own  imagination.  Instead 
of  heeding  the  universal  testimony  of  history,  he 
assumed  the  role  of  creative  power.  He  may  have 
picked  up  something  out  of  the  books,  but  the 
genius  of  a  statesman  must  transcend  the  wisdom  of 
the  books,  especially  those  upon  Political  Economy, 
which  upon  the  subject  of  money  violate  every  rule 
of  reason,  as  well  as  the  universal  experience  of 
mankind.* 

*  The  writer,  in  a  recent  work  on  "  Money;  its  Laws  and  His- 
tory," preferred  a  grave  indictment  against  the  Economists,  for  their 
teacliings  upon  the  subject  of  money.  One  illustration  will  serve 
for  all. 

"While  the  State,"  says  Ricardo,  "coins  money,  aiid  charges  no 
seigniorage,  money  will  be  of  the  same  value  .is  any  other  piece 
of  the  same  metal  of  equal  weight  and  fineness  ;  but  if  the  State 
charges  a  seigniorage  for  coinage,  the  coined  piece  of  money  will 
generally  exceed  the  value  of  the  uncoined  piece  of  metal  by  the 
whole  seigniorage  charged,  because  it  will  reriuire  a  greater  quan- 
tity of  labor,  or,  which  is  the  same  thing,  the  value  of  the  produce  of 
a  greater  quantity  of  labor  to  procure  it. 

"  While  the  .State  alone  coins,  there  can  be  no  limit  to  this  charge 
of  seigniorage  ;  for,  by  limiting  the  quantity  of  coin,  it  can  be 
suited  to  any  concciv.ible  value. 

"Iliionlhis  principle  that  paper  money  circulates;  the  whole 


238     RESUaMPTION  AND  THE  SILVER  QUESTION. 

Should  the  mode  of  resumption  suggested — the 
only  practicable  one — be  resorted  to,  the  gold  now 
in  the  Treasury  will  have  been  collected  to  good 
purpose.  The  greater  part  of  it  can  be  used  in  the 
purchase  of  bonds,  and  in  this  way  go  into  the  pos- 
session of  the  banks.  But  the  retirement  of  the 
government  notes  would  by  no  means  establish  an 

charge  for  paper  money  may  be  considered  as  seigniorage.  Though 
it  has  no  intrinsic  value,  yet  by  limiting  its  quantity,  its  value  in 
exchange  is  as  great  as  an  equal  denomination  of  coin  or  of  bullion 
in  that  coin.  On  the  same  principle,  too,  namely,  by  a  limitation 
of  the  quantity,  a  debased  coin  would  circulate  at  the  value  it  should 
have  if  it  were  of  the  legal  weight  and  fineness,  not  at  the  value  of 
the  quantity  of  metal  which  it  actually  contained.  *  *  * 

"  On  these  principles  it  will  be  seen  that  it  is  not  necessary  that 
paper  money  should  be  payable  in  specie  to  secure  its  value  ;  it  is 
only  necessary  that  its  quantity  should  be  regulated  according  to 
the  value  of  the  metal  which  is  declared  to  be  its  standard.  If  the 
standard  were  gold,  of  a  given  weight  and  fineness,  paper  might  be 
increased  with  every  fall  in  the  value  of  gold,  or,  which  is  the  same 
thing  in  its  effects,  with  every  rise  in  the  price  of  goods.  *  *  * 

"A  currency  is  in  its  more  perfect  state  when  it  consists  wholly 
of  (government)  paper  money ;  but  of  paper  money  with  an  equal 
value  with  the  gold  which  it  professes  to  represent.  The  use  of  paper 
instead  of  gold  substitutes  the  cheapest  in  place  of  the  more  expen- 
sive modern  medium,  and  .enables  the  country  without  loss  to  any 
individual  to  exchange  all  the  gold  which  it  issues,  and  for  this  pur- 
pose, for  raw  materials,  utensils,  and  food,  by  the  use  of  which  both 
its  wealth  and  enjoyments  are  increased."  * 

The  flights  of  Bland  and  Voorhees,  in  reference  to  the  nature  and 
laws  of  money,  are  not  a  whit  more  extravagant  than  those  laid 
down  in  the  preceding  extracts,  doctrines  which  are  taught  as  fun- 
damental principles  in  every  college  in  the  country,  in  which  politi- 
cal economy  is  part  of  the  course,  and  in  which  the  works  of  Adam 
Smith,  Ricardo,  John    Stuart  Mill,  Bowen,  in  fact  of  the  whole 


■r 


THE  METHOD  OF  RESUMPTION.  239 

adequate  monetary  system  for  the  country.  To 
accomplish  this  involves  a  radical  change  in  the 
law  creating  the  national  banks.  They  would  not 
be  alluded  to  in  this  connection,  were  it  not  cer- 
tain that  they  must  occupy  a  prominent  place  in 
all  discussions  upon  the  reformation  of  the  curren- 
cy. The  banks,  when  they  resume,  must,  unless 
their  circulation  be  greatly  reduced,  provide  coin 
reserves  equaling  at  least  $300,000,000.  A  period 
would  soon  be  reached  when  government  notes 
will  no  longer  serve  for  such  purpose.  Govern- 
ment could  supply  a  large  amount ;  but  this  will 
cost  as  much  as  it  would  to  import  it  from  abroad. 
Where  are  their  means  for  such  a  vast  accumulation 
of  coin  ?  The  capital  of  a  great  portion  of  them  is 
locked  up  in  Washington.  Upon  this  they  receive 
interest  in  gold,  a  very  profitable  arrangement, 
so  long  as  they  remain  in  suspension.  They  now 
issue    their    notes    with    almost    entire    impunity. 

class,  are  used  as  text-books.  What  have  we  to  expect  from  legis- 
lative bodies  when  our  universities,  the  most  distinguished  in  llic 
land  as  the  sources  of  instruction,  teach  that  which  is  not  ojily 
wholly  repugnant  to  reason,  and  whicl\is  not  sanctioned  by  a  sin- 
gle exami)ic  in  history,  but  is  refuted  by  all?  That  doctrines  alike 
opposed  to  reason  and  experience  should  have  held  undisputed 
sway  over  the  conviction  or  assent  of  the  race,  since  teaching  began, 
is  the  most  striking  example  which  history  has  yet  afforded  of  the 
longevity  of  sophisms  when  uttered  with  a  great  show  of  learning 
and  sanctioned  by  great  names,  and  of  their  immunity  from  attack 
when  a  hoary  antiquity  shall  have  rendered  impious  all  impiiry  as  to 
their  right  to  rule. 

•  Principle*  o(  "  Pohucal  Economy  and  Taxation,"  chap.  xxv. 


240     RESUMPTION  AND  THE  SILVER  QUESTION. 

When  they  resume,  they  must  have  their  capital, 
not  in  Washington,  but  in  hand.  A  grave  charge 
against  them  at  the  present  time  is,  that  they  are 
annually  receiving  from  the  government  some  $20,- 
000,000  in  coin,  in  addition  to  the  profits  derived 
from  the  regular  business.  There  is  a  certain  de- 
gree of  force  in  this  charge.  There  will  be  none, 
however,  when  resumption  takes  place,  for  they 
must  provide  the  necessary  reserves,  or  go  out  of 
business.  If  they  provide  them  from  sources  other 
than  their  bonds,  they  have  as  good  a  right  to  hold 
these  as  a  part  of  their  investments,  as  have  indi- 
viduals to  hold  bonds  as  a  part  of  theirs.  The 
great  majority  of  the  banks  cannot  afford  to  hold 
them  as  investments.  They  require  their  proceeds 
as  active  capital.  These  would  give  the  banks  all 
they  might  need,  the  greater  part  of  which  could 
be  drawn  from  abroad.  A  bank  in  Minnesota,  for 
example,  which  scraped  together  $100,000,  for  the 
purchase  of  an  equal  nominal  amount  of  bonds,  to 
be  deposited  as  security  for  $90,000  of  notes,  would 
upon  resumption  have  nothing  but  its  deposits — 
which  would  always  be  small  in  amount — to  loan. 
Upon  resumption,  all  its  liabilities  will  return  to  it 
within  periods  of  ninety  days.  It  must  hold  coin 
reserves  in  ratio  to  the  whole  amount  of  its  liabili- 
ties, notes  as  well  as  deposits,  or  it  will  forfeit  the 
confidence  of  the  public,  and  subject  itself  to  a  run 
which  will  inevitably  drive  it  out  of  business.  A 
safety-fund  system  is  adapted  to  only  large  cities. 


* 


THE  METHOD  OF  RESUMPTION-:  24 1 

where  the  loans  are  chiefly  based  upon  deposits, 
utilized  by  checks.  It  never  works  successfully 
with  metropolitan  banks  having  a  large  circulation, 
for  the  reason  that  the  securities  held  for  the  notes 
are  never  available  in  periods  of  great  pressure.  The 
Bank  of  England  holds  $75,000,000  of  governments, 
as  a  part  security  for  its  notes.  As  it  cannot  sell 
the  former  in  a  panic,  every  great  pressure  drives 
it  into  a  position  in  which  it  has  to  invoke  the  aid 
of  government  to  save  it  from  disastrous  failure. 

Resumption  consequently  involves  the  entire 
reconstruction  of  the  banking  system  of  the  coun- 
try. It  is  a  great  misfortune  that  the  central  gov- 
ernment ever  took  the  banks  from  the  control  of 
the  States.  It  was  a  measure  wholly  unwise  in  a 
political  as  well  as  in  a  commercial  point  of  view. 
They  can  be  much  better  looked  after  by  local  au- 
thorities, than  by  those  far  distant  from  the  places 
where  they  are  situated.  This  matter,  however, 
is  referred  to  here  rather  by  way  of  suggestion  than 
argument. 

The  object  of  the  preceding  pages  is  not  so  much 
to  discuss  systems  as  to  show  the  wide  distinction 
between  the  money  of  banks — of  commerce — and 
that  of  government ;  and  the  necessary  effect  of 
the  latter  in  sapping,  alike,  the  moral,  material 
and  intellectual  welfare  of  a  people  using  it.  Every 
example  in  history  fully  sustains  the  deductions  of 
reason.  So  far,  all  issues  of  government  money, 
II 


242     RESUMPTION  AAW  THE  SILVER  QUESTION. 

where  the  amount  has  been  large,  have  been  re- 
pudiated, not  from  choice,  or  any  dcHbcratc  act,  but 
from  necessity.  Our  own  is  tending  rapidly  to  a 
similar  catastrophe.  Where  issued  in  large  amounts, 
no  other  solution  seems  to  be  possible.  The  dan- 
ger, in  our  own  case,  is  greatly  increased  by  the  al- 
most universal  acceptance  of  the  amount  in  circu- 
lation as  good  money.  With  such  premise,  the 
position  of  the  greenbackers  is  a  perfectly  logical 
one  ;  and  it  is  not  strange  that  the  New  Party 
should  receive  a  great  number  of  recruits  of  well- 
meaning  men  from  both  of  the  old  political  organi- 
'zations.  Their  leaders  are  actuated  by  very  dif- 
ferent motives ;  their  object  is  the  repudiation 
alike,  of  the  public  and  private  indebtedness  of 
the  country.  They  have  the  sense  to  see  that  the 
object  which  they  have  so  much  at  heart  will  be 
accomplished  by  a  measure  which  the  Secretary 
himself  recommends — the  receiving  of  government 
notes  in  payment  of  all  the  revenues — as  effectu- 
ally as  by  an  overt  act  declaring  that  the  national 
debt  should  never  be  paid.  Such  a  step  taken, 
there  will  be  but  one  currency  for  government  and 
people.  The  inference  will  not  then  be  a  strained 
one,  that  what  is  good  enough  for  the  government 
and  people  is  good  enough  for  their  creditors.  Such 
a  conclusion,  so  agreeable  to  the  condition  of  the 
country,  and  apparently  so  reasonable,  is  repudia- 
tion. 


INDEX. 


Assignats  of  France,  i6i,  etseq.;  their  first  issue,  163;  arguments 
for,  165,  167,  169  ;  second  issue  of,  16S  ;  third  do.,  170  ;  decline 
in  value  of,  171  ;  effect  of  upon  the  nation,  172;  great  specu- 
lations caused  by,  173  ;  further  issues,  174  ;  plans  for  reducing 
their  amount,  176;  their  futility,  177;  the  character  of  the 
notes,  178;  amount  issued  to  June,  1794.  17S  ;  penalties  for 
refusing  to  receive  them,  179  ;  their  effect  upon  the  nation, 
179;  upon  the  poor,  180;  the  amount  issued,  1S3  ;  amount  in 
circulation  at  their  fall,  183  ;  their  brutalizing  effect,  224. 

Balance  of  trade,  40,  41,  235  (note). 

Bank  of  England.     (See  England,  Bank  of) 

Bank  of  France.     (See  France,  Bank  of) 

I'.ank  of  United  States.     (See  United  States,  Bank  of.) 

Bank  notes,  how  issued,  3  ;  how  retired,  4  ;  symbols  of  capital.  5  ; 
nature  of,  il,  30,  35,  52  ;  their  use  beneficent,  13  ;  reduce  prices, 
13  ;  how  maintained  at  par,  15  ;  bank  reserves,  66  ;  bank  dis- 
counts,  4  ;  currency  of,  197,  198,  2ii,  212  ;  must  resume  with 
the  government,  210,  211  ;  their  inaltility  to  resume,  239. 

Banking  and  Currency,  Committee  on,  of  the  House,  42. 

Banks  of  the  United  States,  their  suspension  in  1S57,  67. 

Bayard,  Senator,  16 ;  remarks  of,  21,  29,  30,  35,  36. 

Bell,  Mr.,  42. 

Bezant   denomination  of  Mongol  money,  140. 

Bland,  Mr.,  his  "  little  experiment,"  225  ;  his  threat  of  revolution, 
225  ;  would  repudiate  the  public  debt,  225,  229. 

Bonds  sold  under  Resumption  Act, 44  ;  not  available  .^s  <^.v^\  to  tho 
banks,  77. 

243 


244 


INDEX. 


BoiUwcll,  Hon.  Mr.,  Secretary  of  the  Treasury,  iiS. 
Ijiickiier,  Mr.,  42. 

Certificates  of  deposit  of  gold,  37  ;  how  difTerent  from  notes,  39,  40. 

Charles  II.  of  England,  96. 

Chase,  Mr.,  Secretary  of  the  Treasury,  184  ;  opposes  issue  of  legal- 
tender  currency,  1S4. 

Chittenden,  Mr.,  42  ;  remarks  of,  17,  42,  45,  97,  107,  112,  114,  li3. 

Church  estates  in  France  confiscated,  162. 

Cocachin,  a  Mongol  princess, '149. 

Coe,  Geo.  S.,  offer  for  purchase  of  bonds,  48. 

Coin  in  hands  of  the  people  essential  to  resumption,,  213. 

Coinage  of  the  United  States,  history  of,  ill,  et  scq.  ;  ratio  of  gold 
to  silver,  113,  115,  120. 

Committee  on  Finance  of  the  Senate,  16 ;  its  conference  with  the 
Secretary  of  the  Treasury,  16,  et  seq.;  of  the  House,  42,  et  seq. 

Communism.  (See  Greenback  Tarty.)  The  cause  of,  222  ;  product 
of  bad  government,  223  ;  remedy  for;  223. 

Confederate  currency,  amount  of,  215,  216. 

Continental  money  of  the  United  States,  108. 

Corwin,  Thomas,  Secretary  of  the  Treasury,  114,  115. 

Couthon,  his  influence  during  the  Reign  of  Terror,  229. 

Crawford,  Mr.,  Secretary  of  the  Treasury,  114. 

Currency.  (See  Legal-tender  currency.)  What  is  a  convertible 
and  useful  currency?  209. 

Deposits  of  State  and  National  Bank,  197, 

Debt  of  the  United  States,  191. 

Discounts  of  banks,  how  made,  4. 

Dunham,  Mr.,  speech  of,  on  the  act  of  1853,  117. 

Fames,  Mr.,  42  ;  remarks  of,  56. 

England,  recoinage  in  1696,  79,  et  seq.;  bank  of,  67  ;  reserves  and 

note  circulation  of,  67  ;  condition  of,   February  28,  1878,  72  ; 

compared  to  Treasury  of  United  States,  75,  103  ;  how  controls 

movement  of  coin,  loi ;  coinage  laws  of,  126. 
Ewing,  Mr.,  42  ;   remarks  of,  48,  57,  63,  70,  77,  91,  99,  106;  his 

incendiary  speech  in  the  House,  228,  229. 


INDEX.  245 

Ferry,  Senator,  16  ;  remarks  of,  29,  35,  41. 

Fort,  Mr. ,  42  ;  remarks  of,  59. 

France,  bank  circulation  of,  16,  29,  35,  41  ;  coin  in,  212. 

France,  sketch  of  coinage  of,  127,  el  scq.;  Assignats  of,  161,  ct  seq. 

Germany,  sketch  of  coinage  of,  130,  et  seq.;  coin  in,  212. 

GilfiUan,  Mr.,  Assistant  Secretary  of  Treasury,  statement  of,  37. 

Gold,  never  the  basis  of  currency,  60 ;  gold  dollar  undervalued 
112;  metal  in,  112;  ratio  of,  to  silver,  113;  present  value  of, 
depressed  in  ratio  to  greenbacks,  213. 

Gouy  advocates  issue  of  Assignats,  166. 

Government  money,  9;  how  issued,  10;  always  legal  tender,  12; 
drives  metallic  money  out  of  circulation,  12  ;  its  cflcct  upon 
prices,  12  ;  fluctuations  in  value  of,  14  ;  injurious  eflect  of,  14  ; 
always  at  a  discount,  31  ;  will  be  drawn  as  soon  as  provision  is 
made  therefor,  33,  50 ;  how  maintained  at  par,  34  ;  how  dilTer- 
ing  from  certificates  of  deposit,  39  ;  never  money  without  legal- 
tender  clause,  52  ;  amount  of,  on  resumption,  55  ;  always  in 
excess,  57  ;  inferior  to  debased  metallic  money,  SS  ;  issuer  of, 
never  resumes,  93  ;  interest  not  saved  by  its  use,  109  ;  what  is 
it?  207,  210;  never  convertible,  210. 

Greenback  Party,  217,  et  seq.  ;  what  it  requires  of  governpicnt,  222  •, 
the  effect  of  its  principles,  222;  a  party  of  communists,  222; 
its  rapid  growth,  230  ;  its  success  already  achieved,  231. 

Hamilton,   Alexander,  Secretary   of  the  Treasury,  iii;  report  of, 

1791,  upon  the  coinage,  iii. 
Ilardcnljurg,  Mr.,  42. 
Hart,  Mr.,  42. 
Hartzcll,  Mr.,  42. 

Hayes,  President,  vcfoes  the  Silver  P.ill,  126. 
Hoojicr,  Mr.,  remarks  of,  126. 
Hunter,  Senator,  on  the  act  of  1S53,  iif). 

Izzuddin  Muzadar,  paper  money  of,  144. 

Jones,  Senator,  16;  remarks  of,  2i,  29,35. 

Kaikhatu  Khan,  account  of  paper  money  of,  144. 


246  INDEX. 

Kellcy,  Mr.,  remarks  on  the  coinage,  iig. 

Kernan,  Senator,  16  ;  remarks  of,  28,  40,  42. 

Knox,  J.  J.,  Comptroller  of  the  Currency,  report  of,  Il8. 

Law,  John,  account  of  money  of,  162. 

Legal-tender  money  of  the  Mongols,  138,  et  seq.;  of  the  Ameri- 
can Revolution,  149,  el  scq.  ;  decline  in  price  of,  151;  tariff 
of  prices,  153  ;  amount  issued,  154  ;  effect  of,  156;  continued 
issue  of,  157;  efforts  to  sustain  its  price,  157;  its  fall,  159; 
its  effect,  160;  of  France,  161,  <■/  scq.;  second  issue  of,  in 
United  States,  184;  issue  not  necessary,  186;  effect  of,  190; 
Congress  votes  to  retire,  192. 

Linderman,  Dr.,  director  of  the  mint,  118. 

Liverpool,  Lord,  letter  of,  to  the  king,  127. 

Locke,  John,  reply  of,  to  Lowndes,  84. 

Lowndes,  proposal  of,  to  debase  the  coinage,  82. 

Macaulay,  Lord,  upon  the  recoinage  in  l6g6,  79,  86. 

McCulloch,  'Hugh,  Secretary  of  the  Treasury,  191  ;  recommends  re- 
tirement of  legal-tender  notes,  191. 

Maine,  progress  of  Greenback  Parly  in,  230. 

]\Iandats  of  France,  account  of,  181. 

Marat,  a  leading  character  in  the  French  Revolution,  229. 

RLiximum  laws  established  in  France,  175  ;  their  effect,  175. 

Ming  dynasty,  money  of,  143,  14S. 

Jlint  of  the  United  States,  fii. 

Mirabeau  advocates  the  issue  of  the  Assignats,  165. 

Mobs  in  the  United  States  in  1877,  229  ;  the  destruction  caused  by, 
229. 

Money,  what  is  paper?  i  ;  of  banks,  3,  et  scq.;  of  government,  9,  et 
seq.;  nation  rich  in  ratio  to,  208. 

Mongols,  legal-tender  money  of,  138,  et  seq.;  note  of  the  Ming 
dynasty,  148  ;  amount  of,  141,  143. 

Morrill,  Senator,  16;  remarks  of,  19,  35,  98,  202;  his  speeches, 
upon  legal-tender  money,  203,  204,  205,  206,  207. 

National  Party,  217. 


INDEX.  247 

Necker,  M.,  opposes  issue  of  Assignats,  162. 
Nobles,  estates  of,  in  France  confiscated,  174. 
Notes.     (See  United  States  notes.) 

Paper  money,  what  is  it?  1  ;  an^ount  per  head  of  population,   199  ; 

evils  of  excess  of,  199. 
Phillips,  Mr.,  42  ;  remarks  of,  5S. 

Political  Economists,  teachings  of,  on  the  subject  of  money,  237. 
Polo,  Marco,  account  of  the  money  of  the  Mongols,  13S. 
Poor,  how  affected  by  fall  in  price  of  silver,  137  ;  how  affected  by 

issue  of  government  money,  220,  221. 
Population,  money  per  head  of,  igg. 
Public  credit,  act  for  maintenance  of,  193  ;  how  defective,  196; 

Railroads,  effects  of  paper  money  on  the  construction  of,  199. 

Ramsey,  Dr.,  on  the  Continental  currency,  160. 

Repudiation,  the  fate  of  legal-tender  currencies,  121  ;  of  the  United 
States  notes,  242. 

Reserves  of  banks,  7,  66,  67,  6S,  200,  2or,  203. 

Resumption  of  specie  payments,  16;  provision  for,  30;  impossible 
upon  plan  of  the  Secretary  of  the  Treasury,  32  ;  how  possible, 
33;  how  to  be  aided  by  Congress,  35;  how  accomplished, 
198  ;  necessary  provision  therefor,  215  ;  method,  233. 

Rossia,  state  of  currency  in,  93. 

Saint  Just,  a  leading  character  of  the  French  Revolution,  229. 

Sherman,  Hon.  John,  Secretary  of  the  Treasury,  16;  confer- 
ence with  Committee  of  Finance  of  the  Senate,  16,  fl so/.; 
opposed  to  repeal  of  resumption  act,  17  ;  resumption  u]K>n 
a  double  standard,  20  ;  silver  bill  incrcxscd  demand  for 
bonds,  21  ;  silver  dollars  to  circulate  at  par  of  gold,  22; 
reserves  to  be  lield  in  resumption,  aS ;  in  favor  of  legal- 
tender  notes,  28 ;  banks  to  take  care  of  tlicmsclvcs,  29 ; 
notes  to  be  received  for  bonds,  35  ;  c(|uality  of  notes  to  coin, 
35;  notes  to  be  received  for  customs  duties,  36;  equal  in 
value  to  gold  cerlificates,  37  ;  liow  adverse  drain  of  gold 
to  be  met,  40;  expansion  to  follow  resumption,  41  ;  confer- 
ence with  Committee  of  House  on  banks,  43,  c/  sf<J-;  wliat  arc 


248 


INDEX. 


government  notes  without  the  legal-tender  clause,  53  ;  hostility 
to  the  banks,  54  ;  amount  of  U.  S.  nqtes  upon  resumption,  55,  56  ; 
resumption  to  increase  the  gold  in  the  treasury,  57  ;  to  diminish 
demand  for  gold,  58  ;  government  in  banking  business,  58;  Trea- 
sury of  the  United  States  stronger  than  the  Bank  of  England,  70; 
bonds  held  by  national  banks  to  be  converted  as  cash  reserves, 
75  ;  how  silver  dollars  to  be  maintained  in  circulation,  77  ;  would 
suspend  specie  payments  in  case  of  a  drain  of  coin,  92  ;  difB- 
culty  of  sorting  bank  notes  an  element  of  strength,  g7  ;  method 
of  maintaining  an  equivalency  between  coin  and  notes,  99  ; 
example  of  the  Bank  "of  England,  99 ;  upon  the  issue  of 
legal-tender  notes,  185  ;    the  plan  of  resumption,  197,  2iO. 

Silver  Bill,  its  eiTect  upon  resumption,  19,  23  ;  veto  of,  126. 

Silver  dollars  cannot  be  exported,  21  ;  how  many  required  to  pay 
duties,  40  ;  cannot  be  raised  above  their  bullion  value,  49  ; 
cannot  be  got  into  circulation,  8g  ;  over-valued  by  the  act  of 
1791,113;  under-valued  by  the  act  of  1834, 114;  coinage  of, 
117  ;  demonetized  1873,  124  ;  monetized  in  1878,  125  ;  ob- 
ject of,  133. 

Silver,  subsidiary  coins  of,  T15  ;  effect  of  fluctuations  in  value  of, 
135,  et  seq. 

Silver  Question,  III,  et  seq. 

Sinking  Fund,,  the,  45. 

Specie,  how  drain  of  to  be  met,  41. 

Standard  of  value  to  agree  with  that  of  England,  133. 

Stanwood,  Edward,  on  the  coinage  laws,  122. 

Sybel,  von,  account  of  the  Assignats  of  France,  175-180. 

Tabriz,  account  of  paper  money  in,  144. 

Talleyrand  opposes  issue  of  Assignats,  166. 

Terror,  reign  of,  in  France,  230. 

Treasury  of  the  United  States.     (See  United  States  Treasury.) 

Tuglak,  Sultan  Mahommed,  account  of  money  of,  146  147. 

United  States,  condition  of  treasury  of,  17;  in  the  banking  busi- 
ness, 61  ;  cannot  issue  convertible  currency,  66 ;  condition 
of,    April   I,  1878,   and    January  1,  1879,77;    compared  with 


INDEX. 


249 


Bank  of  England,  75-103  ;  second  issue  of  legal-tender  cur- 
rency in,  1S4,  ct  seq. 
United  States  notes  not  money  unless  legal  tender,  185;  issue  not 
necessary,  185;  effect  of,  189;  Congress  votes  to  retire  190; 
reissue  of,  196  ;  act  providing  for  redemption  of,  196  ;  objects 
of  the  acts  of  1S66-1S63,  197;  amount  of,  197;  compound- 
interest  notes,  197,  198  ;  increase  of  notes,  198  ;  change  of 
public  opinion  in  reference  to,  200  ;  amount  of,  outstanding, 
202;  value  of,  how  determined,  213;  high  price  accounted 
for,  213,  214  ;  effect  of  further  issue  of,  218,  219;  brutalizing 
effect  of,  224,  225  ;  act  to  prevent  retirement  of,  231  ;  danger 
of  their  repudiation,  232  ;  to  be  funded,  232,  233,  235. 

Veto  of  Silver  Bill  by  President  Hayes,  126. 

Voorhees,  Senator,  16;  remarks  of,  21,  28,  35,  ct  seq.;  his  incen- 
diary speech  in  the  Senate,  226,  227,  229. 

Wallace,  Senator,  16. 

Washington,  his  indifference  to  popular   favor,  24  ;  his  opinion  of 

the  Continental  currency,  155. 
Webster,  Peletiah,  upon  effect  of  Continental  currency,  160. 

Yates,  Mr.,  42. 

Yule,  Col.  Henry,  account  of  legal-lender  money  of  the  Mongols, 
133,  ct  scq. 

1 1* 


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